The  Investor's  Primer 


BY 

John  Moody 


OF  THE 

{   UNIVERSITY  ) 

OF 


Published  by 

The  Moody  Corporation 

35  Nassau  Street,  New  York 
1907 


Copyright,  1Q07,  by 
JOHN  MOODY 
All  rights  reserved 


THE    MOODY-BARTON     PRESS 
ELIZABETH,     N.    J. 


PREFACE. 

There  has  long  been  a  demand  for  a  concise 
handbook  which  would  give,  in  simple,  under- 
standable language,  definitions  of  all  the  im- 
portant terms  and  phrases  employed  in  the  in- 
vestment and  banking  business.  This  little 
book  represents  an  effort  to  in  some  measure 
supply  this  demand. 

The  book  is  really  in  two  parts,  the  first  part 
covering  the  general  definitions  of  finance ;  the 
second  giving  specific  information  regarding 
the  various  issues  of  preferred  and  guaranteed 
stocks  which  are  generally  classed  among  the 
investment  issues.  Many  other  small  books 
furnish  information  regarding  bonds,  quota- 
tions, etc.,  etc.,  but  this  specific  and  useful  in- 
formation has  not,  as  far  as  the  writer  knows, 
been  heretofore  presented  for  popular  uses,  in 
this  particular  way. 

Although  the  definitions  are  all  arranged 
alphabetically  in  dictionary  style,  yet,  to  facili- 
tate practical  use  of  the  volume,  an  alphabetical 
index  is  inserted  in  the  back. 


173039 


vS1 

V 


OF 

CALIF 


Introduction 

>-pHE  investment  of  money  is  a  business, 
•••  just  as  the  manufacture  of  shoes  and  the 
selling  of  food  are  businesses.  But  modern 
investing  is  even  more  than  a  business;  it  is 
influenced  by  and  covers  all  businesses,  all  en- 
terprises, all  industry.  In  the  early  days  of 
the  Republic,  the  situation  was,  of  course, 
somewhat  different.  At  that  time  there  was 
but  little  wealth  and  therefore  little  capital. 
Population  was  sparse,  privation  was  great, 
men  were  absorbed  in  holding  body  and  soul 
together,  in  feeding  and  clothing  themselves, 
rather  than  in  seeking  for  luxuries.  There 
was  no  leisure  class  in  those  days  and,  as  a 
consequence,  no  investing  class.  For  then,  an 
investing  class  could  only  be  drawn  from  a 
leisure  class.  Nowadays  investors  are  made 
up  from  all  classes,  and  a  vast  amount  of 
money  which  is  invested  in  stocks  and  bonds 
and  other  enterprises  is  the  money  of  the  poor, 
of  the  moderately-well-to-do  and  of  the  indus- 
trious, as  well  as  of  the  merely  rich  and  the 
non-industrious  or  idle.  One  hundred  years 

5 


6  THE  INVESTOR'S  PRIMER 

ago  only  a  very  few  could  spare  anything  be- 
yond their  daily  needs  for  investment  in  out- 
side things.  If  they  accumulated  any  wealth 
at  all  above  their  cost  of  living,  it  was  used  to 
buy  or  build  a  home,  raise  and  educate  a  family 
or  develop  a  small  undertaking  of  their  own. 
And,  indeed,  even  though  they  acquired  or 
possessed  surplus  wealth,  practically  the  only 
forms  of  investment  accessible  were  govern- 
ment securities  or  loans  upon  realty.  There 
were  no  railroads,  no  trolley  companies,  no 
manufacturing  enterprises  of  large  size,  or 
other  fields  for  the  productive  employment  of 
surplus  capital.  Even  savings  banks  were 
practically  unknown,  and  mining  or  explora- 
tion enterprises  were  largely  of  that  uncertain, 
speculative  nature  that  only  the  boldest  and 
least  timorous  would  look  favorably  upon. 

But  to-day  the  field  of  investment  covers 
enterprises  of  every  conceivable  nature. 
Manufacturing  corporations  covering  every 
thinkable  need  or  luxury  of  the  human  being, 
distributing  concerns  selling  every  kind  and 
class  of  necessity  and  luxury  in  the  line  of 
food,  clothing,  or  what  not,  are  all  embraced 
in  the  investment  field.  Transportation 
methods  of  every  kind  from  the  stage-coach 
to  the  powerful  locomotive,  from  the  coal  cart 
to  the  automobile,  are  operated  with  the  capi- 


INTRODUCTION  7 

tal  of  investors.  Our  department  stores,  our 
restaurants,  our  candy  manufacturers,  our 
theaters,  our  magazines  and  newspapers,  the 
advertisements  in  the  street  cars,  many  of  the 
metropolitan  barber  shops,  the  boot-black 
stands,  and  the  news  stands  and  book  stores  are 
operated  by  corporations,  the  capital  in  which 
is  largely  derived  from  investors.  Not  a  large 
building  is  now  put  up  on  lower  Broadway  but 
that  an  enormous  corporation  puts  in  the  foun- 
dation; another  corporation  erects  the  super- 
structure and  still  others  put  on  the  finishing 
touches,  all  being  concerns  whose  shares  or 
bonds  are  owned  by  investors  in  all  parts  of 
the  country.  The  hats  we  wear,  the  umbrellas 
we  carry,  the  suit  of  clothes,  the  shoes,  the 
socks,  the  shave  we  had  this  morning,  or  the 
ham  we  ate  this  noon — all  these  were  shaped 
and  produced  to  a  large  extent  by  the  money  of 
investors.  When  we  realize  that  one  corpo- 
ration in  this  country  boasts  of  over  eighty 
thousand  stockholders,  and  that  many  others 
are  known  to  have  over  thirty  thousand,  we  be- 
gin to  get  a  slight  idea  of  the  magnitude  of 
the  investment  field. 

But  this  is  not  all.  Not  only  is  all  modern 
(business  essentially  the  investors'  field,  but 
all  the  obligations  of  municipalities,  of  coun- 
ties, cities  and  States  are  held  by  investors. 


8  THE  INVESTOR'S  PRIMER 

The  governments  themselves  build  up  their 
navies  and  armies,  carry  on  wars  and  develop 
public  works  with  the  money  of  investors.  A 
case  in  point  is  our  own  Panama  Canal.  And 
not  only  do  the  investors  of  one  country  sup- 
ply funds  for  their  own  activities,  but  they  also 
supply  much  for  the  activities  of  other  nations. 
Thus,  when  the  American  is  investing  money 
in  a  Mexican  gold  mine  or  in  Japanese  Govern- 
ment bonds,  he  is  supplying  investment  funds 
to  undertakings  in  those  countries,  and  when 
the  Englishman  or  Frenchman  buys  our  rail- 
road or  industrial  bonds  or  stocks,  he  is  supply- 
ing investment  capital  for  undertakings  in  our 
own  country.  The  investors*  field  in  this 
country  would  seem,  therefore,  to  be  limited 
only  by  the  wealth  of  the  country  itself. 

But  what  about  the  methods  for  investing 
money?  Where  does  the  money  come  from? 
Does  it  all  come  into  Wall  Street  and  the  other 
financial  centers,  or  does  it  flow  directly  from 
the  pockets  of  the  investors  into  the  under- 
taking or  enterprise  itself? 

Speaking  broadly,  there  are  two  methods 
by  which  money  is  invested  in  any  given  enter- 
prise. These  are,  direct  and  indirect.  The 
person  who  places  money  directly,  or  through 
a  broker  or  banker,  in  a  specific  enterprise  or 
undertaking  is  a  direct  investor.  He  person- 


INTRODUCTION  9 

ally  becomes  the  stock  or  bond-holder  in  a  cor- 
poration of  his  own  choosing.  But  the  man 
•who  deposits  his  money  in  a  savings  bank,  in- 
surance, or  trust  company  or  State  or  National 
bank,  is  an  indirect  investor.  His  money  goes 
into  an  investment  of  some  sort  where  it  earns 
the  interest  which  he  receives  and  possibly  a 
little  more.  In  the  former  case,  he  sees  his 
money  at  work;  it  stays  presumably  in  the 
place  where  he  puts  it.  In  the  latter  case,  he 
delegates  the  matter  of  actual  investment  to 
another — to  the  bank — which  acts  in  the  ca- 
pacity of  a  trustee,  and  invests  his  money  for 
him.  And  in  both  cases,  the  money  may 
easily  be  invested  in  the  same  enterprise.  Thus, 
in  the  latter  case,  he  may  place  his  money  in  a 
savings  bank,  and  the  bank  may  then  invest 
it  in  New  York  Central  Railroad  y/2%  bonds. 
In  the  former  case  he  may  himself,  through  an 
investment  banker,  purchase  New  York  Central 
Railroad  3%%  bonds.  His  money  is  in  the 
same  enterprise  in  both  instances,  the  chief 
difference  being  that,  in  one  case,  he  knows  it; 
in  the  other,  he  does  not. 

This  brief  sketch  of  the  investment  field 
which  obtains  in  this  country  to-day  will  give 
a  rough  idea  of  the  breadth  of  the  subject 
under  discussion.  And,  in  taking  this  broad 
view,  we  must  bear  the  fact  in  mind  that  this 


10  THE  INVESTOR'S  PRIMER 

is  not  a  stationary  condition,  for  the  American 
investment  field  is  broadening  and  intensify- 
ing every  day.  It  is  not  only  growing  in  size 
and  volume,  but  also  in  density.  We,  even 
more,  I  think,  than  most  other  modern  nations, 
are  going  through  a  quiet,  steady,  but  most  re- 
markable evolution  in  the  methods  of  wealth 
production  and  distribution.  Ten  years  ago 
we  were  referred  to  as  "a  nation  of  investors," 
but  this  appellation  is  far  more  appropriate  to- 
day than  it  was  then.  The  changes  during  the 
past  ten  years  in  this  respect  are  in  no  way 
better  illustrated  than  in  the  remarkable  ex- 
pansion of  Wall  Street.  The  mere  growth  of 
stock  exchange  business,  while  great  in  itself, 
is  not  a  complete  guide  in  this  matter.  We 
must  necessarily  take  into  consideration  the 
vast  expansion  of  investment  business  outside 
of  the  stock  exchange  floor. 

While  there  are  no  accurate  figures  for 
demonstration,  the  acknowledged  fact  that  a 
hundred  first-class  investment  houses  exist  in 
the  Street  to-day  where  ten  existed  in  1896  is 
evidence  enough  in  itself  that  the  expansion 
has  been  great.  In  1896  or  1897,  if  an  invest- 
ment bond  house  bought  or  sold  $500,000  or 
$1,000,000  of  bonds  in  one  block  or  at  one  time, 
the  fact  was  heralded  far  and  wide  as  a  notable 
event;  nowadays  such  transactions  and  much 


INTRODUCTION  11 

larger  ones  are  constantly  going  through  and 
create  no  comment  whatever.  In  those  days, 
if  a  bond  or  investment  firm  made  half  a 
million  dollars  in  any  one  year,  it  was  regarded 
as  a  most  remarkable  showing,  but  at  the 
present  time,  dozens  of  houses  can  be  pointed 
out  in  the  Street  which  are  making  this  or  a 
better  showing  every  year.  To-day,  single 
firms  buy  entire  issues  of  bonds  or  stocks) 
sometimes  running  into  the  tens  of  millions  in 
amount;  ten  years  ago  this  was  unheard  of, 
and  usually  a  "million  dollar  loan"  was  re- 
garded as  of  such  magnitude  that  it  required 
a  syndicate  of  half  a  dozen  or  more  concerns 
to  underwrite  it.  In  the  field  of  stock  specula- 
tion and  trading,  in  those  days,  a  business  of 
15,000  shares  in  one  day  was  regarded  as  very 
large.  To-day  many  firms  do  50,000  to  100,000 
shares  per  day  right  along  in  normal  times. 
Then,  a  firm  carrying  on  margin  $5,000,000 
worth  of  stocks  was  a  large  firm ;  to-day  many 
are  constantly  carrying  from  $30,000,000  to 
$40,000,000  worth.  In  the  actual  banking  field 
the  expansion  has  been  equally  great.  Now 
many  banks  and  trust  companies  in  the  city  of 
New  York  can  boast  of  deposits  of  $40,000,000 
and  over;  in  those  days  none  could.  And  yet 
there  are  now  several  times  the  banking  facili- 
ties in  New  York  that  there  were  in  1896. 


12  THE  INVESTOR'S  PRIMER 

While  Wall  Street  is  the  main  center  of  in- 
vestment, it  alone  has  not  enjoyed  all  the  ex- 
panding. Other  cities,  all  over  the  land,  can 
now  boast  of  financial  and  investment  centers 
of  no  mean  extent.  In  most  cases  they  have 
close  alliances  with  the  main  center  in  New 
York,  but  they  are  all  sharing  in  the  general 
expansion  of  this  particular  phase  of  modern 
commercial  advancement. 

The  fact  should  be  consistently  borne  in 
mind  that  this  great  investment  field  is  con- 
stantly being  accelerated  from  several  sources. 
Not  only  does  it  benefit  by  the  steady  growth 
of  population  and  general  development  of  the 
country,  but  it  expands  steadily  because  of 
the  fact  that  it  is  becoming  increasingly  neces- 
sary to  do  things  more  and  more  on  a  large 
scale,  and  this  tendency  automatically  involves 
the  elimination  of  the  smaller  producer  and 
competitor,  and  forces  a  steadily  expanding 
element  into  the  field  of  investment.  Even 
the  busy  workers  of  today,  as  well  as  the 
leisure  classes  and  those  who  pursue  the  pro- 
fessions, find  it  profitable  to  place  their  surplus 
funds  more  and  more  into  enterprises  outside 
of  their  chosen  environment.  It  is  this  tend- 
ency of  modern  civilization  which  has  much  to 
do  with  making  the  investor  class  of  greater 
importance  in  all  parts  of  the  country. 


PART  I. 


The  Investor's  Primer 

ACCOUNT  AND  RISK.  The  forms  usu- 
ally provided  by  brokers  for  the  use  of  their 
customers  when  giving  orders  for  purchases  or 
sales  of  securities,  bears  the  inscription,  "Buy 
or  sell  for  my  account  and  risk."  The  meaning 
of  this  is  that  when  an  order  as  given  is  exe- 
cuted by  the  broker,  it  is  done  for  the  account 
and  risk  of  the  customer  exclusively,  and  that 
the  broker  is  simply  acting  as  the  agent  in  the 
matter  and  is  therefore  in  no  sense  liable  him- 
self, but  holds  the  customer  wholly  responsible 
for  the  transaction. 

ACCRUED  DIVIDEND.  The  amount  or 
proportion  of  a  regular  dividend  not  yet  pay- 
able that  has  accumulated  at  a  given  time  after 
the  date  of  payment  of  the  preceding  regular 
dividend.  For  instance,  if  a  dividend  on  a 
stock  at  the  rate  of  6%  per  annum  is  payable 
semi-annually  January  and  July  1st,  the 
amount  of  accrued  dividend  on  a  given  date, 
such  as  April  1st,  will  be  1%%.  Cumulative 
dividends  which  have  not  been  paid  when  due, 
15 


Ifi  THE  INVESTOR'S  PRIMER 

but  which  have  accumulated,  are  sometimes 
called  accrued  dividends,  but  the  correct  term 
for  such  is  "accumulated  dividends."  A  cumu- 
lative dividend  is  an  entirely  different  matter. 

ACCRUED  INTEREST.  This  is  the 
amount  of  interest  on  a  bond  or  debenture* 
stock  not  yet  payable,  but  which  has  accrued 
over  a  given  period  of  time  subsequent  to  the 
last  regular  payment.  For  instance,  if  the  in- 
terest on  a  4%  bond  is  payable  semi-annually 
January  and  July  1,  the  amount  of  accrued 
interest  on  the  bond  on  April  1st  would  be  ex- 
actly 1%,  which  on  a  $1,000  bond  would 
amount  to  $10.  Many  bonds  are  quoted 
"with  accrued  interest"  and  sold  on  this  basis. 
This  is  particularly  true  of  unlisted  issues, 
municipal  bonds,  etc.  Most  of  the  issues 
quoted  on  the  stock  exchanges  are  sold  "flat" ; 
that  is,  the  accrued  interest  is  not  separately 
figured  but  is  included  in  the  price.  To  bring 
the  distinction  out  concretely  between  a  price 
quoted  with  accrued  interest,  and  a  price 
quoted  "flat"  the  following  illustration  is  sub- 
mitted: If  a  4%  bond  is  selling  at  90  and  ac- 
crued interest  on  January  1st,  the  total  cost  of 
the  bond  will  be  exactly  $900 ;  but  if  on  April  1st 
it  is  still  quoted  at  90  and  accrued  interest,  the 
total  cost  of  the  bond  will  be  not  $900  but 


THE  INVESTOR'S  PRIMER  17 

$910,  the  $10  representing  the  accrued  inter- 
est over  the  preceding  three  months.  If,  how- 
ever, the  bond  is  quoted  "flat"  the  price  on 
April  1st,  other  things  being  equal,  would  be 
given  as  91.  It  will  be  seen,  therefore,  that  the 
matter  of  accrued  interest  directly  affects  the 
"flat"  price  but  does  not  affect  the  "and  in- 
terest" price.  As  very  large  transactions  are 
made  daily  in  bonds  on  an  accrued  interest 
basis,  it  is  necessary  to  do  a  great  deal  of  fig- 
uring from  day  to  day  on  the  amounts  of  ac- 
crued interest  when  making  purchases  and 
sales.  To  facilitate  this,  most  bankers  and 
brokers  make  use  of  pocket  bond  interest 
tables,  which  contain  the  figures  showing  the 
amounts  of  accrued  interest  on  $1,000  bonds 
for  every  day  from  one  day  to  six  months,  at 
the  various  rates  of  interest  from  2%  up  to 
S%.  The  most  popular  of  these  pocket  tables 
in  the  United  States  is  published  by  The 
Moody  Corporation. 

ACCUMULATED  DIVIDENDS.  This 
term  is  properly  used  to  describe  cumulative 
dividends  which  for  one  reason  or  another  have 
not  been  paid  as  they  fell  due.  For  instance, 
in  many  corporations,  particularly  industrials, 
there  are  issues  of  preferred  stocks  on  which 
the  dividend  charge  is  so  heavy  that  the  corpo- 


18  THE  INVESTOR'S  PRIMER 

ration  is  not  able  to  earn  and  meet  the  pay- 
ments. The  amounts  of  dividends,  therefore, 
have  accumulated,  and,  theoretically  at  least, 
must  be  paid  off  some  day.  Usually  when  divi- 
dends of  this  kind  or  portions  of  dividends  have 
accumulated  over  a  series  of  years  and  it  has 
been  pretty  well  demonstrated  that  there  is 
little  prospect  of  the  corporation  being  able 
ever  to  make  good  the  back  payments,  some 
plan  of  compromise  is  then  submitted  to  the 
stockholders  whereby  the  accumulations  are 
paid,  possibly  in  securities  of  some  kind,  and 
then  the  rate  of  dividends  is  scaled  down  for 
the  future.  It  is  not  always  difficult  for  the 
corporation  to  make  a  readjustment  of  this 
kind,  as  the  cumulative  clause  in  a  stock  is 
really  not  of  a  great  deal  of  value  if  the  corpo- 
ration cannot  in  some  way  earn  sufficient 
money  to  pay  the  full  dividend.  In  other 
words,  the  stockholder  has  no  means  of  fore- 
closing on  the  property  or  bringing  legal  ac- 
tion if  the  past  dividends  are  not  paid. 

ADJUSTMENT  BOND.  This  term  is  used 
to  describe  a  bond  which  has  been  issued  for 
the  purpose  of  in  some  way  adjusting  the 
finances  of  a  company,  usually  at  the  time  of 
a  reorganization.  For  example,  when  the 
Atchison,  Topeka  &  Santa  Fe  system  was  re- 


THE  INVESTOR'S  PRIMER  19 

organized  in  1897,  some  compromise  had  to  be 
made  with  the  old  preferred  stockholders  and 
the  holders  of  the  general  mortgage  bonds.  It 
was  necessary  for  the  road  to  radically  reduce 
its  fixed  charges,  but  at  the  same  time  the  re- 
organization committee  could  not  avoid  giv- 
ing the  holders  of  a  large  proportion  of  the 
old  securities  something  more  tangible  than  a 
mere  preferred  stock.  The  holders  were  there- 
fore given  a  second  mortgage  bond,  which 
would  be  entitled  to  receive  interest  only  in 
case  the  same  had  been  earned,  and  in  no 
case  would  the  holders  of  the  bond  be  able  to 
foreclose  before  maturity  in  the  event  of  the 
interest  not  being  paid.  The  interest  on  this 
particular  issue  was  to  become  accumulative 
after  5  years,  but  as  far  as  any  positive  guar- 
antee of  interest  being  currently  paid  was  con- 
cerned, the  issue  was  simply  in  the  same  class 
as  the  ordinary  accumulative  preferred  stock. 
It  will  thus  be  seen  that  this  issue  of  bonds 
was  in  the  nature  of  a  compromise  for  the 
benefit  of  the  holders  of  old  securities,  and  it 
was  therefore  given  the  title  of  "adjustment 
bond."  Several  other  large  issues  of  adjust- 
ment bonds  have  since  been  created  by  other 
companies,  but  the  Atchison  "adjustments" 
are  the  most  conspicuous  example  of  this  kind 
of  security. 


20  THE  INVESTOR'S  PRIMER 

ALLOTMENT.  A  term  used  in  connec- 
tion with  the  amounts  assigned  to  members  or 
subscribers  in  underwriting  syndicates.  For 
example,  it  is  generally  understood  when  an 
underwriting  syndicate  is  being  formed  and 
different  concerns  are  subscribing  for  portions 
of  the  underwriting,  that  the  managers  of  the 
syndicate  have  it  in  their  power  to  allot  to  a 
given  subscriber  less  than  the  amount  applied 
for,  provided  the  total  subscription  or  under- 
writing exceeds  the  total  amount  offered  for 
subscription.  There  have  been  many  instances 
where  an  over-subscription  of  a  stock  or  bond 
issue  has  been  so  great  that  the  subscriber  is 
finally  allotted  only  a  small  proportion,  some- 
times only  10%  of  the  amount  for  which  he 
has  subscribed.  This  fact  of  a  tendency  for 
over  subscription  has  often,  in  the  case  of 
popular  securities,  had  the  result  of  inducing 
underwriters  to  sometimes  subscribe  for  even 
greater  amounts  than  they  expected  to  get.  In 
this  way,  they  have  been  able  to  secure  the 
amounts  which  they  actually  desired. 

ARBITRAGE.  The  meaning  of  this  ex- 
pression is  the  buying  and  selling  of  the  same 
thing  in  two  different  markets,  as,  for  instance, 
New  York  and  London,  the  purpose  being  to 
make  a  profit  from  the  difference  in  the  quo- 


THE  INVESTOR'S  PRIMER  21 

tations  between  the  two  markets.  The  term  is 
used  chiefly  in  reference  to  dealings  in  stocks 
and  bonds,  but  is  also  used  in  dealings  in  ex- 
change and  in  other  commodities. 

Arbitrage  in  stocks  is  based  on  the  tempo- 
rary differences  in  prices  between  the  different 
markets  for  the  same  stock.  For  instance, 
when  a  stock  is  selling  at  a  higher  price  in  one 
market  than  in  another,  it  is  sold  in  the  market 
where  the  higher  price  prevails  and  is  bought 
in  the  market  where  the  lower  price  prevails. 
The  operator  speculates  on  a  return  to  the 
same  price  in  both  markets.  When  the 
equality  in  price  has  been  restored  he  closes 
his  transaction  by  buying  where  he  sold  and 
selling  where  he  bought.  The  difference  in 
price  that  existed,  of  course,  represents  his 
profit,  unless  the  transaction  has  not  been  a 
successful  one,  in  which  case  a  loss  may  be 
reported. 

To  illustrate  the  method  of  arbitrage  trad- 
ing we  will  assume  that  a  stock  is  selling  in 
one  market  at  100  and  in  another  at  98.  It  is 
then  sold  in  the  first  market  at  100  and  bought 
on  contract  in  the  second  market  at  98.  If 
the  stock  advances  to  100  in  the  second 
market  while  it  remains  stationary  in  the  first 
market  a  sale  is  then  made  in  the  second 
market  and  thus  2%  is  made  on  the  transac- 


22  THE  INVESTOR'S  PRIMER 

tion  there.  The  same  amount  of  stock  is  then 
bought  back  in  the  first  market  at  100,  and 
hence  neither  profit  nor  loss,  barring  commis- 
sions, results  in  the  transaction  in  the  first 
market,  the  profit  in  the  second  market  repre- 
senting the  entire  net  profit  of  the  double 
transaction.  Should  the  stock  decline  to  99  in 
the  first  market  and  advance  to  99  in  the  sec- 
ond market  the  transaction  can  be  closed  up 
with  a  profit  of  \%  in  each  market  or  2%  in 
the  two  markets. 

Because  of  the  system  of  calculating  values 
for  American  stocks  on  the  London  Stock  Ex- 
change, prices  on  the  London  Exchange  are 
2%%  higher  than  the  prices  for  the  same 
stocks  on  the  New  York  Stock  Exchange  when 
they  are  actually  the  equivalent  of  the  prices 
on  the  New  York  Exchange.  Hence,  in  arbi- 
trage dealings,  allowance  has  to  be  made  for 
this  difference  in  prices  between  London  and 
New  York,  which  is  merely  apparent  and  not 
actual.  The  figure  of  2y%%  mentioned  above 
is  arrived  at  in  the  following  manner :  In  deal- 
ings in  American  stocks  on  the  London  Stock 
Exchange  four  shillings  is  counted  as  one  dol- 
lar. Four  shillings  being  equal  to  97  1-3  cents, 
the  price  of  an  American  stock  must  be  2  2-3% 
(quotably  2S/S%)  higher  in  London  than  in 
New  York  if  the  London  price  is  to  be  equiva- 


THE  INVESTOR'S  PRIMER  23 

lent  to  (or  at  a  parity  with)  the  New  York 
price.  Not  2%%  of  the  par  value  is  to  be 
added  arbitrarily  to  the  New  York  price,  but 
2%%  of  the  New  York  price,  whatever  it  may 
be,  is  to  be  added  to  the  New  York  price  to 
make  an  equivalent  London  price.  Thus,  for 
a  stock  selling  at  50  in  New  York  the  equiva- 
lent price  in  London  would  be  quotably  51%%. 
For  a  stock  selling  at  100  in  New  York  the 
equivalent  price  in  London  would  be  102%%- 
Conversely,  for  a  stock  selling  at  100  in  Lon- 
don the  equivalent  price  in  New  York  would 
be  97%%,  and  for  a  stock  selling  at  50  in  Lon- 
don the  equivalent  price  in  New  York  would 

be  48H%- 

The  difference  in  equivalent  prices  between 
New  York  and  London  permits  two  kinds  of 
operations  in  stocks  that  are  dealt  in  in  both 
markets.  One  operation  is  called  a  "spread" 
and  the  other  is  called  a  "back  spread."  See 
also  definition  of  "spread"  as  used  locally 
under  its  own  heading. 

In  the  "spread"  as  employed  in  arbitrage 
dealings  there  must  be  more  than  a  normal 
difference  in  prices  between  London  and  New 
York.  The  stock  is  sold  in  London  where  the 
higher  price  prevails,  and  bought  in  New  York 
where  a  lower  price  prevails.  Then,  when  the 
equality  in  price  is  restored  the  transaction  is 


24  THE  INVESTOR'S  PRIMER 

closed  by  buying  in  London  and  selling  in 
New  York.  The  difference  in  excess  of  the 
normal  difference  represents  the  profit  in  the 
transaction. 

In  the  "back  spread"  there  must  be  less  than 
the  normal  difference  in  prices  between  New 
York  and  London.  The  stock  is  therefore 
bought  in  London  where  the  nominal  higher 
price  prevails,  and  is  sold  in  New  York  where 
the  nominal  lower  price  prevails.  The  tran- 
saction is  finally  closed  when  the  equality  in 
price  has  been  restored  by  selling  in  London 
and  buying  in  New.  York.  The  difference  in 
price  that  existed  less  than  the  normal  differ- 
ence, represents  the  profit  in  the  transaction. 

A  large  arbitrage  business  in  active  stocks  is 
carried  on  between  London  and  New  York  by 
cable  daily.  By  the  clock  London  is  five  hours 
ahead  of  New  York.  At  10  a.  m.  in  New  York, 
when  the  New  York  Stock  Exchange  opens, 
it  is  3  p.  m.  in  London.  The  London  Exchange 
opens  at  11  a.  m.  and  closes  at  4  p.  m.,  except 
on  the  last  day  of  accounting,  when  it  closes 
at  4.30  p.  m.  After  the  closing  of  the  London 
Exchange,  American  stocks  are  still  traded  in 
in  the  Street.  A  good  part  of  this  street  market 
represents  arbitrage  business  with  New  York. 
Very  little  business  is  transacted  in  New  York 
before  the  opening  of  the  New  York  Exchange, 


THE  INVESTOR'S  PRIMER  20 

but  orders  are  sent  to  London  for  execution. 
The  London  curb  brokers  remain  active  as 
long  as  there  is  business  to  keep  them,  con- 
tinuing usually  as  late  as  5.30  or  6  o'clock. 

There  is  also  a  business  in  arbitrages  car- 
ried on  in  grain,  cotton,  coffee  and  so  forth, 
between  different  markets  in  one  country  or 
between  different  countries,  just  the  same  as  in 
stocks  between  New  York  and  London. 

ASSENTED    STOCKS    OR    BONDS.     A 

term  which  describes  securities,  deposited 
under  an  agreement  by  which  the  owners  as- 
sent to  some  change  in  the  status  of  the  securi- 
ties. Many  reorganizations  of  properties  are 
carried  through  without  foreclosure  or  other 
legal  process,  the  owners  of  the  securities  as- 
senting to  some  change  in  the  status  of  their 
stocks  or  bonds  such  as  an  exchange  for  new 
securities,  with  possibly  less  principal  or  in- 
terest. See  also  Reorganization. 

ASSESSMENT.  An  assessment  on  a  se- 
curity is  a  demand  or  call  from  a  company  or 
its  management  upon  stockholders  to  pay  into 
the  treasury  a  specified  sum  of  money  on  each 
share  of  the  security  which  they  may  hold. 
There  are  many  kinds  of  assessments,  the  most 
common  in  Wall  Street  being  that  which  re- 


26  THE  INVESTOR'S  PRIMER 

suits  as  part  of  a  plan  of  reorganization  by 
means  of  which  funds  are  secured  for  the  dis- 
charge of  debts  and  for  working  capital. 
While  most  stocks  of  railroads  and  other 
large  corporations  are,  in  a  legal  sense,  non- 
assessable yet  in  a  reorganization  where  con- 
ditions have  made  it  necessary  for  the  differ- 
ent security-holders  to  make  concessions  and 
sacrifices,  assessments  are  often  paid.  These 
assessments  are,  of  course,  in  a  sense  voluntary, 
and  are  agreed  to  by  the  stockholder  and  paid 
in  order  to  preserve  the  property  with  the  hope 
that  the  reorganization  will  result  in  ultimately 
adding  value  enough  to  the  securities  to  repay 
the  stockholder  for  the  expense  of  the  assess- 
ment. Often  the  stockholder  has  no  alterna- 
tive except  to  pay  the  assessment.  If  he  does 
not  pay  it,  usually  an  underwriting  syndicate 
stands  ready  to  take  his  stock  at  a  current 
market  price  (which  is  often  a  merely  nominal 
one)  and  pay  the  assessment  itself.  This  re- 
sults in  the  former  stockholder  sacrificing 
practically  his  entire  interest  and  he  is  then, 
in  a  sense,  "frozen  out."  Any  future  benefit 
from  the  reorganization  is,  of  course,  derived 
by  the  payer  of  the  assessment,  who  naturally 
takes  the  chance  of  the  future  success  of  the 
company  and  is  therefore  entitled  to  its  future 
profits. 


THE  INVESTOR'S  PRIMER  27 

ASSIGNED  IN  BLANK.  The  ordinary 
stock  certificate  has  on  its  back  a  printed  form 
of  assignment,  whereby  the  owner  of  the  cer- 
tificate can  endorse  the  same  and  thus  make 
it  a  good  delivery  in  selling  it  or  passing  it  on 
to  another  party.  By  signing  this  form  in 
blank  he  makes  a  legal  and  formal  assignment 
of  the  stock  to  any  purchaser  who,  of  course, 
can  fill  in  his  own  name  in  the  blank  provided 
for  the  purpose  and  then  have  it  transferred 
on  the  books  of  the  company  in  the  usual  way, 
receiving  a  new  certificate  in  his  own  name. 
The  New  York  Stock  Exchange  rules  provide 
that  any  stock  certificate  assigned  in  blank  by 
the  owner  must  carry  a  witness  to  the  signa- 
ture, and  also  a  formal  guarantee  of  the  sig- 
nature by  some  stock  exchange  house  in  good 
standing.  This,  of  course,  is  to  guard  against 
forgeries,  errors,  etc. 

AVERAGING.  This  is  a  speculative  term 
describing  a  method  of  purchases  or  sales  of 
stock,  which  speculators  often  pursue  in  ad- 
vancing or  declining  markets,  for  the  purpose 
of  improving  their  position  regarding  the  aver- 
age cost  of  certain  purchases  or  sales  of  stock. 
For  instance,  should  a  man  be  dealing  in  New 
York  Central  stock  on  a  speculative  basis,  he 
might  begin  by  purchasing  100  shares  at  110. 


28  THE  INVESTOR'S   PRIMER 

Should  the  price  then  decline  to  105,  his  trans- 
action up  to  that  date  would  show  him  a  loss 
of  $500.  He  might  then  purchase  another  100 
shares  at  105,  and  he  would  thus  be  carrying 
200  shares  at  an  average  cost  of  107^.  Should 
the  price  then  advance  to  above  107^  his 
entire  account  would  show  no  loss,  and  he 
could  close  out  the  transaction  2*/2  points  be- 
low the  cost  of  the  first  hundred  shares  and 
yet  not  lose  any  money.  The  practice  of  aver- 
aging is  carried  on  sometimes  on  a  much 
larger  scale.  Investors  or  speculators  will 
often  put  in  orders  to  make  purchases  on  a 
"scale  down,"  buying  at  every  point  or  two, 
and  in  a  declining  market  where  a  given  stock 
may  drop  25  points,  100  shares  may  have  been 
purchased  at  every  point  down.  Each  pur- 
chase naturally  brings  the  average  cost  of  the 
entire  account  down  to  a  lower  figure. 

The  method  of  averaging  is  also  employed 
in  the  sales  of  stocks  by  investors  and  specu- 
lators in  the  same  way,  both  in  selling  stocks 
for  long  account  and  for  short  account. 

BALANCE  OF  TRADE.  The  difference  in 
money  value  between  sales  and  purchases. 
In  foreign  trade,  the  difference  in  money  value 
between  exports  and  imports.  As  commonly 
used  the  term  signifies  the  balance  or  differ- 


THE  INVESTOR'S  PRIMER  29 

ence  in  favor  of  a  country ;  as,  for  instance,  the 
United  States  as  against  the  rest  of  the  world; 
or  in  favor  of  the  rest  of  the  world  and  against 
that  country.  When  exports  exceed  imports 
over  a  given  period  the  balance  of  trade  is  said 
to  be  in  favor  of  the  country,  and  vice  versa. 

BANKING.  The  banking  business  is  al- 
most as  old  as  civilization  itself.  Money  lend- 
ers are  mentioned  many  times  in  the  Bible  and 
in  all  other  ancient  literature,  but  banking  in 
its  modern  sense  as  understood  in  the  civilized 
countries  of  the  world  today  is  more  of  an 
evolution  that  has  resulted  as  the  natural  out- 
growth of  modern  industrial  development  and 
commercial  conditions.  Modern  banking  may 
be  said  to  have  begun,  therefore,  within  the 
past  three  hundred  years.  Prior  to  that  time 
each  man  was,  in  a  large  degree,  the  individual 
defender  and  protector  of  his  own  property. 
For  instance,  three  centuries  ago  it  was  not 
safe  to  venture  out  after  nightfall  in  the  streets 
of  London  unless  properly  armed  or  in  com- 
pany, and  the  carrying  of  valuables  of  any 
kind  was  particularly  hazardous.  Goldsmiths, 
who  in  those  days  necessarily  had  to  keep  on 
hand  large  stocks  of  the  precious  metals,  took 
great  precautions  for  the  safe  keeping  of  prop- 
erty of  this  kind  and  people  gradually  acquired 


30  THE  INVESTOR'S  PRIMER 

the  habit  of  depositing  money  with  them,  pay- 
ing something  for  the  privilege  in  order  to  re- 
ceive the  accompanying  protection.  In  the 
course  of  time  the  goldsmiths  learned  from  ex- 
perience that  many  people  who  had  so  de- 
posited money  did  not  require  it  at  once,  and 
they  thus  began  to  lend  out  a  certain  percent- 
age of  their  surplus  on  their  own  authority. 
Furthermore,  it  was  found  that  if  a  man  had  to 
discharge  a  debt  it  was  often  more  convenient 
for  him  to  give  his  creditor  an  order  for  the 
money  on  deposit  with  the  goldsmith  than  to 
go  in  person  and  carry  away  the  gold  and  de- 
liver it,  and  thus  impose  upon  the  creditor  the 
necessity  of  returning  the  gold  for  deposit  in 
his  own  name,  and  many  times  in  the  same 
place.  This  situation  developed  the  system  of 
•a  transfer  of  credits  by  means  of  checks.  This 
method  was  not  only  safer  but  much  more  con- 
venient than  the  earlier  method  of  delivering 
the  actual  coin  or  bullion.  In  making  loans, 
likewise,  the  goldsmith  now  became  the  banker 
and  learned  to  merely  put  the  loan  on  his 
books  as  a  credit  to  the  borrower,  against 
which  the  latter  could  draw  his  order  or  check 
precisely  as  if  he  had  deposited  the  actual 
money;  or  the  goldsmith  issued  his  own  note 
or  promise  to  pay  to  the  borrower,  the  latter 
passed  it  on  in  payment  of  debts  and  it  became 


THE  INVESTOR'S  PRIMER  31 

a  circulating  medium  wherever  the  credit  of 
the  goldsmith  was  good. 

Modern  banking  has  evolved  to  its  present 
state  from  this  beginning.  The  chief  function 
of  the  modern  bank  is  to  receive  on  deposit  and 
make  legitimate  use  of  the  money  of  its  cus- 
tomers. It  makes  this  money  and  its  own  paid 
up  capital  the  basis  of  loans,  on  which  it 
charges  interest  in  accordance  with  the  laws 
under  which  it  is  chartered.  While  these  loans 
may  take  the  form  of  actual  money,  they  are, 
as  a  rule,  merely  credits  against  which  the  bor- 
rower is  privileged  to  draw.  Such  loans  are 
entered  on  the  books  of  banks  as  deposits.  In 
actual  experience  the  loans  and  deposits  so 
nearly  counterbalance  each  other  that  only  a 
small  percentage  of  actual  money  is  required 
to  transact  the  larger  affairs  of  business.  It  is 
only  in  retail  transactions,  in  the  payment  of 
employees  and  in  the  smaller  daily  affairs  of 
life  that  actual  money  is  usually  used.  For  all 
other  business  the  transfer  of  credits  by  means 
of  bank  checks  and  bills  of  exchange  is  the 
almost  universal  rule.  In  brief,  the  modern 
bank  has  become  the  principal  mechanism  of 
exchange.  To  what  a  remarkable  extent  bank 
checks  have  supplemented  or  taken  the  place 
of  actual  money  as  a  medium  of  exchange  in 
modern  business,  thus  making  possible  the 


32  THE  INVESTOR'S  PRIMER 

wonderful  commercial  and  industrial  activity 
of  the  present  day,  can  be  best  realized  by 
studying  the  figures  of  the  operations  of  the 
various  clearing  houses  of  this  and  other  coun- 
tries and  the  relation  which  the  actual  money 
in  the  vaults  of  the  banks  bears  to  the  total 
transactions  recorded. 

In  addition  to  its  functions  as  depositories 
for  money  and  the  negotiation  of  credits,  the 
modern  bank  exercises  the  function  of  note- 
issuing.  In  the  United  States,  under  the  na- 
tional banking  law,  any  national  bank  may 
issue  notes  up  to  the  amount  of  its  paid  in 
capital  stock  upon  depositing  with  the  United 
States  Treasurer,  government  bonds  of  the 
United  States  equal  in  par  value  to  the  amount 
of  circulating  notes  so  issued.  State  banks  are 
also  authorized  to  issue  notes,  but  the  Federal 
tax  of  10%  on  their  circulation  acts  as  an  ef- 
fective prohibition  on  the  exercise  of  this  right. 

While  the  business  of  banking  is  embraced 
within  the  above  general  scope,  yet  the  term 
banker  is  very  broadly  used,  particularly  in  the 
United  States.  Stock  brokers,  investment 
dealers,  dealers  in  exchange  and  commercial 
paper,  money  lenders,  and  others  are  accus- 
tomed to  call  themselves  bankers.  Strictly 
speaking  these  are  inaccurate  uses  of  the  term, 
although  it  is  now  generally  acknowledged 


THE  INVESTOR'S  PRIMER  33 

that  in  modern  usage  the  term  banker  must  be 
understood  to  carry  a  broader  meaning  than 
was  formerly  the  case. 

BANK  OF  ENGLAND.  The  Bank  of  Eng- 
land, which  is  the  largest  and  most  important 
monetary  institution  in  the  world,  was  incor- 
porated in  1694.  It  is  the  custodian  of  the  pub- 
lic monies  of  Great  Britain  and  the  manager  of 
the  public  debt.  Its  official  title  is  "The  Gov- 
ernor and  Company  of  the  Bank  of  England." 
It  conducts  the  banking  business  of  the  British 
government ;  it  receives  the  revenue  of  the  gov- 
ernment and  makes  all  disbursements  for  it; 
and  it  also  issues  exchequer  and  treasury  bills 
and  advances  money  to  the  government.  It  is 
also  the  central  bank  of  the  City  of  London. 
That  is,  the  other  banks  keep  on  their  own 
premises  only  enough  of  their  deposits  for  the 
requirements  of  their  business,  and  deposit  the 
remainder  with  the  Bank  of  England.  Thus, 
the  bank  is  not  only  the  financial  institution  of 
the  British  Government,  but  also  of  the  other 
London  banks  and  of  the  whole  of  the  London 
money  market. 

BANK  OF  ENGLAND  NOTE.  The  circu- 
lating note  or  money  issued  by  the  Bank  of 
England  performs  the  chief  note-issuing  func- 


34  THE  INVESTOR'S  PRIMER 

tion  in  the  United  Kingdom.  The  bank  is  per- 
mitted to  issue  a  certain  amount  of  notes  upon 
government  securities,  and  it  has  the  privilege 
of  issuing,  also  on  government  securities,  an 
amount  equal  to  two-thirds  of  the  issues  of  all 
other  banks  in  England  and  Wales  when  the 
latter  go  out  of  existence  or  surrender  their 
circulation.  In  addition,  the  Bank  of  England 
may  issue  notes  to  any  further  amount  it  sees 
fit  by  providing  and  setting  aside  an  equal 
amount  of  gold  coin  or  bullion. 

In  times  of  panic  the  bank  is  allowed  by 
parliament  to  increase  the  number  of  notes  that 
it  may  issue  against  securities.  This  is  accom- 
plished by  the  suspension  of  the  "Bank  Act," 
which  limits  the  amount  of  the  bank's  circula- 
tion of  notes  backed  only  by  securities.  The 
Bank  Act  was  last  suspended  in  1866. 

The  Bank  of  England's  notes  are  legal  tender 
in  England  and  Wales,  but  are  not  legal  tender 
in  payments  made  by  the  bank  itself.  The 
holders  of  the  bank  notes  are  entitled  to  de- 
mand gold  for  them  on  presentation  at  the 
bank.  The  notes  of  other  English,  Irish  and 
Scotch  banks  are  not  legal  tender,  with  the  ex- 
ception of  the  notes  of  the  Bank  of  Ireland, 
which  are  legal  tender  in  Ireland  only.  All  the 
notes,  however,  constitute  an  important  circu- 
lating medium.  Ultimately  the  Bank  of  Eng- 


THE  INVESTOR'S  PRIMER  35 

land  will  possess  the  monopoly  of  note  issue  in 
England  and  Wales. 

The  lowest  denomination  of  a  Bank  of  Eng- 
land note  is  £5  and  the  largest  £1,000. 

BANK  OF  ENGLAND  RATE.  This  is  the 
proper  title  for  the  minimum  rate  of  discount 
of  the  Bank  of  England.  The  .minimum  rate 
is  nominally  the  rate  at  which  the  Bank  of 
England  itself  will  discount  the  best  three 
months  bills.  In  short,  it  is  the  official  stand- 
ard of  discount.  The  rate  has  a  direct  relation 
to  the  movement  of  gold  to  and  from  London. 
For  instance,  the  raising  of  the  rate  raises  the 
value  of  money  and  is  calculated  to  attract  gold 
from  foreign  centers  where  the  value  of  money 
is,  for  the  time  being  at  least,  less.  The  di- 
rectors of  the  bank  often  insure  the  effective- 
ness of  the  rate  by  borrowing  in  the  money 
market,  thus  denuding  it  of  supplies.  As  the 
raising  of  the  bank's  rate  raises  the  value  of 
money,  so  the  lowering  of  it  lowers  the  value 
of  money. 

BANK  STATEMENT.  In  New  York  City 
a  bank  statement  is  issued  from  the  New  York 
Clearing  House  on  each  Saturday.  The  weekly 
statement  is  the  collective  showing  made  by 
the  banks  belonging  to  the  Clearing  House  As- 


36  THE  INVESTOR'S  PRIMER 

sociation.  This  consolidated  bank  statement 
shows  the  average  deposits,  loans,  specie,  legal 
tenders,  circulation,  reserve  and  surplus  re- 
serve for  the  week  ending  with  and  including 
Friday. 

The  deposits  include  the  credit  balances  of 
persons  and  concerns,  balances  to  the  credit 
of  other  banks,  and  all  other  money  and  credits 
subject  to  withdrawal.  The  item  loans,  in- 
cludes money  loaned  and  paper  bought,  such 
as  promissory  drafts,  etc.  Specie  includes  gold 
and  silver  coin  and  also  gold  and  silver  certifi- 
cates, which  are  redeemable  in  gold  or  silver. 
Legal  tenders  means  United  States  notes 
(greenbacks)  and  treasury  notes  (notes  issued 
for  silver  bullion,  purchased  under  the  so-called 
Sherman  act).  Circulation  means  the  notes  is- 
sued by  national  banks  which  are  secured  by 
government  bonds,  deposited  with  the  United 
States  Treasurer.  A  bank  cannot  count  circu- 
lation in  its  reserve,  and  whether  it  is  its  own 
circulation  or  the  circulation  of  some  other 
bank  makes  no  difference.  Reserve  means  the 
amount  of  specie  and  legal  tenders  held.  Sur- 
plus reserve  is  the  amount  of  specie  and  legal 
tenders  held  in  excess  of  legal  requirement. 
For  instance,  a  national  bank  in  New  York 
City  must,  by  law,  maintain  a  reserve  equal  to 
23%  of  its  profits;  a  State  bank  must  by  law 


THE  INVESTOR'S  PRIMER  37 

maintain  a  reserve  of  15%.  In  compiling  a 
bank  statement  a  reserve  of  25%  is  allowed  or 
figured  for  State  banks  as  well  as  national 
banks.  The  bank  statement  is  said  to  be  made 
up  on  rising  averages  when  the  items  in  it  have 
been  increasing  in  amount  during  the  week; 
or  the  statement  is  said  to  be  made  up  on  fall- 
ing averages  when  the  items  in  it  have  been 
decreasing  in  amount  during  the  week.  The 
bank  statement  is  favorable  or  good  when  it 
shows  that  the  position  of  the  banks  has  been 
strengthened,  as  by  an  increase  in  the  surplus 
reserve  through  an  increase  in  the  cash  hold- 
ings rather  than  by  a  decrease  in  the  deposits, 
which  latter  is  often  affected  by  the  calling  of 
loans.  As  money  loaned  is  largely  credited  to 
borrowers  on  their  deposit  accounts  and  in- 
creases the  total  deposits  of  the  banks,  so  the 
payment  of  loans  by  borrowers  takes  from  and 
decreases  deposits.  It  will  thus  be  seen  that 
the  calling  and  payment  of  loans  does  not  in- 
crease cash  holdings,  but  merely  changes  bal- 
ances in  individual  accounts.  A  reduction  in 
deposits  reduces  the  amount  of  cash  required 
to  be  held  as  legal  reserve,  and  correspondingly 
expands  the  surplus  reserve. 

The  bank  statement  is  understood  to  be 
unfavorable  when  the  position  of  the  banks  has 
been  weakened,  as  by  a  decrease  in  the  surplus 


38  THE  INVESTOR'S  PRIMER 

reserve  through  a  decrease  in  the  cash  holdings 
rather  than  by  an  increase  in  the  deposits, 
which  often  is  effected  by  an  expansion  in  the 
loans,  thus  correspondingly  expanding  the  de- 
posits and  increasing  the  amount  of  cash  re- 
quired to  be  held  as  a  legal  reserve.  The  bank 
statement  may  be  said  to  be  favorable,  how- 
ever, if  an  increase  in  loans  is  reported  when 
the  banks  have  a  large  surplus  reserve.  Also, 
it  may  be  said  to  be  unfavorable  when  money 
is  idly  accumulating  in  the  banks  and  deposits 
are  increasing,  not  as  a  result  of  increasing 
loans,  but  in  the  absence  of  a  borrowing  de- 
mand for  money. 

In  addition  to  the  statement  issued  by  the 
clearing  house  banks  on  Saturday  there  is  also 
issued  on  Monday  what  is  known  as  the  non- 
member  bank  statement,  which  shows  the  con- 
dition of  the  banks  which  are  not  members  of 
the  clearing  house,  but  which  clear  through 
members  of  that  institution.  The  non-member 
statement  shows  the  loans,  discounts,  invest- 
ments, specie,  legal  tender  notes  and  bank 
notes,  deposits  with  clearing  house  agents,  de- 
posits with  other  New  York  City  banks  and 
trust  companies,  net  deposits,  circulation,  capi- 
tal stock  and  net  profits. 

BEAR.    A  bear  in  Wall  Street  is  a  specula- 


THE  INVESTOR'S  PRIMER  39 

tor  who  works  to  secure  or  who  believes  in 
lower  prices ;  in  the  stock  market  it  is  one  who 
sells  stock  short,  or  advises  the  selling  of  stock 
short  for  the  purpose  of  buying  back  at  a 
lower  price.  A  speculative  dealer  in  grain,  cot- 
ton or  other  commodities  may  be  a  bear  as  well 
as  a  speculator  in  stocks.  For  methods  of 
operation  pursued  by  bears  see  "Selling  Short." 

BILL  OF  EXCHANGE.  A  written  order 
or  request  from  one  person  to  another  for  the 
payment  of  money  to  a  third,  the  amount  to  be 
charged  to  the  issuer  of  the  bill.  There  is  prac- 
tically no  difference  between  a  bill  of  exchange 
and  a  draft.  The  term,  however,  is  commonly 
applied  to  an  order  for  money  payable  in  a 
foreign  country,  whereas  the  term  draft  is  ap- 
plied to  an  order  payable  within  the  country 
of  its  origin. 

Bills  of  exchange  constitute  a  most  import- 
ant circulating  medium.  The  wholesale  tran- 
sactions of  the  world  between  countries  are 
affected  by  bills  of  exchange,  which  are  not 
limited  like  bank  notes  to  the  country  of  their 
origin.  When  commercial  bills  of  exchange  are 
accompanied  by  bills  of  lading  or  warehouse 
receipts,  or  by  other  documents,  they  are  of  a 
superior  nature.  They  command  a  lower  rate 
of  discount,  or  in  other  words,  bring  a  better 


40  THE  INVESTOR'S  PRIMER 

price  than  bills  not  secured.  In  a  stringent 
money  market  they  are  saleable  when  other 
bills  are  refused.  See  also  Foreign  Exchange. 

BLIND  POOL.  When  several  persons  con- 
tribute capital  to  a  pool  for  operating  in  stocks 
or  bonds,  either  on  the  long  or  short  side,  and 
only  the  manager  of  the  pool  knows  in  what 
way  the  money  is  to  be  used,  it  is  known  as  a 
blind  pool.  The  purpose  of  such  a  pool  is  to 
insure  secrecy.  Speculative  blind  pools  are  not 
uncommon  undertakings  in  Wall  Street. 

BONDS.  A  bond  is  a  certificate  of  obliga- 
tion usually  issued  by  a  corporation  to  pay 
money  secured  by  mortgage  or  otherwise.  It 
is  usually  an  interest  bearing  certificate,  and  is- 
sued in  denominations  of  $1,000.  There  are 
many  kinds  of  bonds,  some  being  issued  by 
corporations,  others  by  municipalities  or  gov- 
ernments, and  still  others  by  individuals. 

The  securities  issued  by  governments  are 
generally  designated  as  bonds,  rather  than 
stocks.  The  United  States  government  issues 
are  nowadays  known  as  bonds,  although  they 
were  many  years  ago  known  as  stocks.  Some 
of  the  securities  issued  by  New  York  City  are 
still  designated  as  stocks,  but  American  mu- 


THE  INVESTOR'S  PRIMER  41 

nicipalities  usually  now  designate  their  securi- 
ties as  bonds  rather  than  stocks. 

A  coupon  bond  is  one  both  interest  and  prin- 
cipal of  which  are  payable  to  bearer.  Such  a 
bond  carries  with  it  a  series  of  coupons,  usually 
attached  to  the  bond  itself,  which  are  clipped 
off  on  the  respective  interest  periods  and  de- 
posited with  the  banks  for  collection  by  the 
holder  of  the  bond  in  the  same  manner  as 
checks  are  deposited.  A  registered  coupon 
bond  is  one  which  bears  the  name  of  the  owner, 
and  only  the  principal  can  be  paid  to  him.  The 
interest,  however,  is  still  payable  to  bearer.  A 
straight  registered  bond  is  one  bearing  the 
name  of  the  owner  whose  name  is  registered 
on  the  books  of  the  company  issuing  the  bond, 
and  the  interest  payments  are  made  by  checks 
forwarded  to  the  address  of  the  owner. 

A  gold  bond  is  one  which  is  specifically  pay- 
able, both  principal  and  interest,  in  gold  coin; 
a  currency  bond  is  one  which  is  payable  with 
any  kind  of  money  that  is  legal  tender.  A  large 
bond  is  one  with  a  denomination  of  $10,000. 
A  small  bond  is  one  of  a  denomination  of  $500 
or  less. 

Investment  bonds  are  issued  in  various  de- 
nominations and  at  all  rates  of  interest  from 
3%  up  to  7%.  There  are  at  least  two  dozen 
different  kinds  of  investment  bonds,  such  as 


42  THE   INVESTOR'S   PRIMER 

the  various  railroad  bond  issues,  public  utility 
issues,  industrial  issues,  bonds  on  mines  and 
other  enterprises,  in  addition  to  government  or 
municipal  securities.  The  various  kinds  of 
bond  issues  are  described  throughout  the  pages 
of  this  book  under  their  own  titles  or  headings. 

BOOKS  CLOSE.  This  relates  to  the  trans- 
fer books  for  stocks  and  registered  bonds. 
Usually  on  an  advertised  date  sometime  prior 
to  the  payment  of  a  dividend  on  a  stock  the 
transfer  books  close  and  the  stockholders  of 
record  on  that  day  receive  the  dividend  when 
it  is  paid.  On  and  after  the  day  the  stock 
books  close  the  stock  sells  "ex  dividend"  or 
without  the  dividend.  The  transfer  books  are 
also  usually  closed  on  an  advertised  day  prior 
to  an  election  or  other  stockholders'  meeting, 
and  only  the  stockholders  of  record  at  the 
closing  of  the  books  can  vote  at  that  election 
or  meeting.  A  contract  in  a  stock  falling  due 
during  the  regular  closing  of  the  transfer  books 
of  the  company  is  settled  at  maturity  by  the 
delivery  of  a  certificate  and  power  of  attorney ; 
on  a  contract  which  is  at  the  option  of  the 
buyer  or  of  the  seller,  notice  for  settlement  may 
be  given  as  if  the  books  were  open.  In  case 
the  books  are  closed  for  a  dividend,  the  person 
entitled  to  the  latter  receives  a  due  bill  for  it. 


THE  INVESTOR'S  PRIMER  43 

BOOKS  OPENED.  When  the  transfer 
books  of  the  company  are  opened  the  owner- 
ship of  a  security  can  be  changed  on  the  rec- 
ord, and  at  no  other  time.  In  other  words, 
while  certificates  can  change  hands  at  any  time, 
they  cannot  be  formally  transferred  from  one 
holder  to  another  during  the  period  between 
the  closing  or  the  opening  of  the  transfer  books 
of  the  corporation.  See  above  under  Books 
Close. 

BOOK  VALUE.  The  book  value  of  a 
stock  is  based  on  the  net  profits  or  deficit  of 
the  corporation  which  has  issued  it.  The  term 
book  value  is  more  frequently  used  in  relation 
to  bank  stocks  than  to  the  stocks  of  any  other 
particular  kind  of  corporation.  To  ascertain 
the  book  value  of  any  particular  bank  stock  the 
following  process  is  adopted:  If  the  official 
statement  of  a  bank  shows  net  profits  (surplus 
and  undivided  profits)  equal  to  say  75%  on  the 
stock  outstanding,  then  the  book  value  of  the 
stock  is  the  original  amount  of  the  stock,  100%, 
plus  the  equivalent  in  net  profits,  75%,  or  175. 
If,  on  the  other  hand,  the  bank  shows  no  net 
profits,  but  instead  shows  a  deficit  equal  to 
say  10%  on  the  stock,  the  book  value  of  the 
stock  would  be  only  90.  The  book  value  of 
stocks  of  other  corporations  is  ascertained  in 


44  THE  INVESTOR'S  PRIMER 

the  same  manner,  but  is  not  nearly  so  simple 
for  the  reason  that  it  is  not  usually  easy  to 
ascertain  the  uniform  facts  regarding  assets, 
liabilities,  surplus,  and  so  forth,  and  when  the 
information  is  obtainable  it  is  usually  too  com- 
plex and  involved  for  uniform  and  intelligent 
use. 

BORROWING  AND  LENDING  STOCKS. 
When  a  speculator  sells  stock  short  or  gives 
his  broker  an  order  to  sell  stock  short,  the  stock 
must  be  borrowed  to  make  delivery  to  the  pur- 
chaser. This  is  usually  a  simple  matter  on  the 
exchanges,  as  there  are  generally  plenty  of 
holders  who  are  long  of  stock  and  possess  cer- 
tificates, who  are  just  as  anxious  to  loan  it  as 
the  one  who  has  sold  the  certificate  short  is 
anxious  to  borrow  it.  The  lender  of  stock  on 
the  exchanges  receives  from  the  borrower  the 
market  value  of  it  in  money,  but  except  when 
the  stock  is  loaning  "flat"  or  at  a  premium, 
the  lender  of  the  stock  pays  to  the  borrower  in- 
terest on  the  money  paid  for  the  stock  by  the 
borrower.  On  the  New  York  Stock  Exchange, 
brokers  who  have  stocks  to  borrow  and  to  lend 
assemble  immediately  after  the  close  of  busi- 
ness on  the  Exchange,  and  those  who  need 
stocks  borrow  the  amounts  necessary  to  make 
deliveries  the  next  day.  Those  who  neglect  to 


THE  INVESTOR'S   PRIMER  45 

borrow  at  this  time  must  do  so  the  next  morn- 
ing or  before  the  delivery  hour  at  2.15  p.  m. 
The  same  rules  govern  the  receipt  and  delivery 
of  stocks  borrowed  and  loaned  as  govern 
stocks  bought  and  sold.  In  returning  bor- 
rowed stock  the  borrower  must  notify  the 
lender  before  1  o'clock  on  the  day  of  delivery ; 
the  lender  in  calling  or  demanding  the  return 
of  stock  is  required  to  do  likewise. 

When  a  stock  is  loaned  "flat,"  the  owner  is 
relieved  from  the  cost  of  carrying  the  stock. 
If  loaned  at  a  premium  he  is  still  better  off,  for 
the  premium  is  clear  gain.  If  a  stock  that  has 
been  borrowed  advances  in  market  price,  the 
lender  may  require  the  borrower  to  pay  to  him 
the  difference  between  the  price  at  which  the 
stock  was  loaned  and  the  new  higher  price. 
On  the  other  hand,  if  the  stock  declines  in 
price,  the  borrower  may  require  the  lender  to 
return  to  him  the  difference  between  the  price 
at  which  the  stock  was  borrowed  and  the  new 
lower  price. 

When  a  corner  is  being  worked  in  a  stock, 
it  is  the  practice  of  those  engineering  it,  freely 
to  loan  the  stock  in  order  to  encourage  the  cre- 
ation of  a  short  interest  in  it.  When  this  short 
interest  has  become  large  enough,  or  in  other 
words,  when  the  stock  has  become  sufficiently 


46  THE  INVESTOR'S  PRIMER 

oversold,  a  demand  for  the  return  of  the  stock 
brings  the  corner  to  a  culmination. 

An  apparent  borrowing  demand  for  stocks 
is  sometimes  created  by  the  efforts  of  money 
lenders  to  obtain  higher  interest  on  their 
money  than  is  obtainable  in  lending  it  in  the 
money  market.  If  the  lending  rate  for  a  par- 
ticular stock  is  6%  when  money  is  loaning  at 
4%%  in  the  money  market,  the  money  lenders 
will  borrow  the  stock  in  order  to  obtain  the 
extra  interest. 

BUCKETING.  As  distinguished  from  the 
manner  in  which  a  bucket  shop  operates  (see 
Bucket  Shop),  bucketing  of  stocks  consists  in 
sales  by  a  broker  for  his  own  account  and  risk, 
against  a  customer's  purchase  or  purchases  by 
the  brokers,  against  customers'  sales.  The  pur- 
pose of  the  broker  is  sometimes  to  avoid  the 
employment  of  money  in  carrying  stocks,  but 
more  often  it  is  to  speculate  against  his  cus- 
tomers' trades.  In  either  case  the  broker  wins 
if  his  customers  lose  or  he  loses  if  his  cus- 
tomers win.  For  example,  if  the  customer 
buys  100  shares  of  stock  at  120  the  broker  sells 
100  shares  at  the  same  price.  A  cross  trade  is 
thus  made  by  the  broker ;  the  transactions  bal- 
ance and  the  broker  does  not  have  to  pay  out 
the  money  representing  the  cost  of  the  stock 


THE  INVESTOR'S  PRIMER  47 

purchased  for  the  customer.  If  the  customer 
has  put  up  20%  margin,  the  broker  has  the 
use  of  that  entire  margin  for  other  purposes. 
If  the  stock  goes  down  to  108  and  the  customer 
sells  while  the  broker  buys,  the  transactions 
again  balance,  and  the  customer  loses  2%  which 
the  broker  gains.  On  the  other  hand,  if  the 
stock  goes  up  to  112  and  the  customer  sells 
while  the  broker  buys,  the  customer  makes 
2%,  which  the  broker  loses.  The  broker,  how- 
ever, reduces  his  loss  by  the  extent  of  the 
commission  which  he  receives  from  his  cus- 
tomer. If  the  customer  loses  and  the  broker 
wins  in  the  above  illustration,  the  broker's  gain 
is  really  2%%  instead  of  2%,  while  if  he  loses 
and  the  customer  wins  his  loss  is  actually  only 


There  are  cases  of  frequent  occurrence  where 
some  customers  of  a  broker  have  bought,  while 
others  have  sold  a  given  stock  on  the  same  day 
and  at  about  the  same  price.  If  more  has  been 
bought  than  has  been  sold  the  broker  will  sell 
enough  to  effect  a  balance;  if  more  has  been 
sold  than  has  been  bought  the  broker  will  buy 
enough  to  effect  a  balance. 

BUCKET  SHOP.  A  bucket  shop  is  a  place 
where  bets  are  made  on  regular  exchange  quo- 
tations. No  actual  transactions  take  place. 


48  THE  INVESTOR'S  PRIMER 

The  margin  is  put  up  by  the  customer  and  a 
commission  is  charged  for  buying  and  selling 
the  same  as  on  an  exchange.  When  the  quo- 
tation shows  a  profit  to  the  customer  he  is 
privileged  to  demand  the  profit;  when  the 
limit  of  the  customer's  margin  has  been 
reached  the  customer  has  lost  his  bet  and  the 
transaction  is  closed.  There  are  many  large  as 
well  as  small  bucket  shops  in  existence  in  the 
cities  of  the  United  States,  and  an  enormous 
amount  of  trading  is  done  in  them.  Inasmuch 
as  more  than  80%  of  the  ordinary  speculators 
fail  to  make  money  in  the  long  run,  it  will  be 
seen  that  the  chances  of  money  being  made 
by  the  bucket  shop  are  as  five  to  one  in  com- 
parison with  the  chances  of  the  customer.  In 
ordinary  times,  therefore,  the  bucket  shop  is 
almost  sure  to  make  money.  It  is  only  in  the 
times  of  great  bull  movements,  when  for  short 
periods  the  public  in  the  market  cannot  help 
but  make  money  in  spite  of  their  mistakes,  that 
the  bucket  shop  is  apt  to  be  on  the  losing  side. 
At  such  times  the  bucket  shop  usually  closes 
its  doors,  for  the  time  being,  before  it  has 
undergone  very  heavy  losses.  It  is  unneces- 
sary to  say  that  bucket  shops  are  illegal,  and 
from  time  to  time,  as  charges  are  proven  against 
them,  they  are  closed  up  by  the  civil  authori- 
ties. 


THE  INVESTOR'S  PRIMER  49 

BULL.  This  is  the  title  usually  given  to 
a  speculator  in  Wall  Street  whose  attitude  in 
relation  to  future  prices  is  optimistic.  That 
is,  he  believes  in  higher  prices  and  works  to 
secure  them.  A  bull  is  therefore  anyone  who 
buys  or  favors  buying  stocks,  grain,  cotton  or 
any  other  speculative  commodity  in  the  ex- 
pectation of  selling  it  at  a  higher  price.  See 
also  Bear. 

BUYERS'  OPTION.  In  securities  bought 
on  the  buyers'  option  the  buyer  may  demand 
delivery  of  the  stock  on  any  day  within  the 
time  specified  on  one  day's  notice  to  the  seller. 
The  buyer,  unless  the  contract  is  "flat,"  pays 
the  seller  interest  at  the  legal  rate  on  the  price 
of  the  stock  up  to  the  day  of  delivery.  No 
contract  or  buyers'  or  sellers'  option  for  less 
than  four  days,  or  for  more  than  60  days,  can 
be  entered  into  on  the  New  York  Stock  Ex- 
change. 

CALL.  A  call  on  a  stock  or  bond  is  a  con- 
tract or  written  agreement  binding  the  issuer 
to  deliver  to  the  holder  the  security  named  in 
the  agreement  within  a  specified  time  at  a  par- 
ticular price,  if  the  holder  shall  so  demand. 
For  example,  A  signs  a  promise  to  deliver  100 
shares  of  a  given  stock  to  B  at  110  at  any  time 


50  THE  INVESTOR'S  PRIMER 

within  60  days  if  B  makes  a  demand  for  it.  A 
sells  this  privilege  to  B  for,  we  will  say,  $200. 
If,  within  the  60  days,  the  stock  rises  in  price 
so  that  B  can  sell  it  at  a  profit  above  the  cost 
of  the  privilege  and  commissions  for  selling, 
B  then  sells  the  hundred  shares  and  calls  on  A 
to  make  the  delivery  of  the  certificate  to  him. 
Naturally  the  stock  must  go  above  112%  be- 
fore there  is  any  profit  in  it  for  B.  If  the  stock 
declines  or  does  not  go  above  112J/£,  B  does 
not  call  for  it  and  A  makes  the  $200  on  his  risk, 
B  losing  just  this  amount  See  also  under 
Privilege.  See  also  Put. 

CALL  LOAN.  A  call  loan  is  a  loan  which 
is  payable  on  call  or  demand.  In  Wall  Street 
a  very  large  amount  of  money  is  loaned  on  call 
by  the  banks  to  the  brokers,  the  latter  in  all 
cases  supplying  collateral  to  cover  the  loan. 
By  the  New  York  Stock  Exchange  rules  a  de- 
mand for  the  payment  of  a  call  loan  must  be 
made  before  1  p.  m.  on  any  given  day  and  the 
payment  must  be  made  at  or  before  2.15  p.  m. 
the  same  day.  Also  notice  must  be  given  to  the 
leaner  of  intention  to  pay  a  call  loan  before  1 
o'clock  and  the  payment  must  be  made  by  or 
before  2.15  o'clock. 

CALLED  BOND.  A  called  bond  is  one 
which  carries  a  clause  giving  the  company  is- 


THE  INVESTOR'S  PRIMER  51 

suing  the  bond  the  right  to  redeem  the  princi- 
pal at  a  certain  figure  and  at  a  certain  time. 
Said  right  having  been  exercised,  interest  on 
such  a  bond  usually  ceases  after  the  bond  is 
called. 

CAR  MILES.  A  railroad  term  which  signi- 
fies the  number  of  miles  traversed  within  a 
given  time  by  all  the  cars  on  a  railroad.  The 
number  of  miles  traveled  by  all  cars,  divided 
by  the  number  of  cars,  shows  the  average  num- 
ber of  miles  traveled  by  each  car.  Most  rail- 
road reports  give  these  figures  when  sub- 
mitting statements  of  operations  and  earnings 
to  their  stockholders. 

CHARTER.  The  charter  or  certificate  of 
incorporation  of  a  company  is  the  authority 
conferred  upon  it  by  act  of  legislature  which 
allows  it  to  do  business  along  certain  lines  as 
specified  in  the  charter,  which  usually  defines 
the  general  purposes  and  limits  the  privileges 
of  the  corporation. 

CLOSE  CORPORATION.  An  incorpo- 
rated company,  the  stock  of  which  is  held  by 
the  managers  or  a  very  limited  number  of  per- 
sons and  is  not  in  the  hands  of  the  public,  is 
usually  known  as  a  close  corporation.  It  is 


52  THE  INVESTOR'S  PRIMER 

sometimes  assumed  that  only  small  companies 
carrying  on  limited  kinds  of  business  as  suc- 
cessors to  former  partnerships  in  many  cases 
are  close  corporations.  This  idea,  however,  is 
quite  erroneous,  as  there  are  a  good  many  cor- 
porations, the  capitalization  of  which  runs  into 
the  millions,  which  are  in  every  essential  re- 
spect close  corporations.  Usually  in  a  close 
corporation  there  is  an  agreement  or  under- 
standing among  the  few  stockholders  whereby 
each  is  prohibited  from  disposing  -of  or  selling 
his  interest  without  the  consent  of  the  others. 

COMMERCIAL  PAPER.  As  generally 
understood,  commercial  paper  means  accept- 
ances and  promissory  notes.  Acceptances  are 
drafts  or  bills  of  exchange  which  have  been  ac- 
cepted. In  large  cities  like  New  York  there 
is  a  great  deal  of  business  done  at  all  times  in 
the  buying  and  selling  of  commercial  paper. 
Individual  dealers  buy  from  makers  at  one  rate 
of  discount  and  sell  to  banks  and  other  dealers 
at  a  lower  rate.  Good  commercial  paper  repre- 
sents a  high  class  of  investment. 

COMMON  STOCK.  Common  stock  is  dis- 
tinguished from  preferred  stock  in  that  it  has 
no  preference  as  to  dividends  or  assets.  It  is 
sometimes  called  general  or  ordinary  stock. 


THE  INVESTOR'S  PRIMER  53 

When  a  corporation  has  an  issue  of  preferred 
stock  it  is,  of  course,  necessary  to  give  the  ordi- 
nary stock  the  title  of  common  to  distinguish 
it  from  the  preferred.  If,  however,  there  is  no 
issue  of  preferred  or  other  stock  outstanding, 
then  the  ordinary  stock  is  not  referred  to  as 
"common"  but  is  simply  known  as  plain  capi- 
tal stock.  Sometimes  there  are,  however,  dif- 
ferent kinds  of  common  or  ordinary  stock,  this 
being  particularly  true  of  some  English  issues. 
In  such  cases,  a  portion  of  the  issue  may  be 
called  deferred,  for  the  reason  that  it  may  re- 
ceive no  dividend  until  a  prior  portion  has  re- 
ceived a  dividend  at  a  fixed  rate.  Often  it  is 
the  custom  to  designate  a  portion  of  the  issue 
as  A  stock  and  a  portion  as  B  stock  to  distin- 
guish the  two  classes.  This  employment  of  A 
and  B  is  also  often  used  in  connection  with 
different  classes  of  preferred  stock.  See  Pre- 
ferred Stock. 

CONSOL.  This  term  is  really  an  abbrevi- 
ation or  contraction  of  the  word  consolidated. 
In  England,  however,  it  is  specifically  used  in 
connection  with  the  funded  debt  of  Great 
Britain.  The  debt  of  this  country  is  in  the 
form  of  stock  which  represents  a  consolidation 
of  various  loans,  and  is  therefore  commonly 
known  in  modern  times  as  English  Consols. 


54  THE  INVESTOR'S  PRIMER 

This  public  debt,  representing  nine  different 
loans,  was  consolidated  in  1851  into  3%  stocks 
or,  as  Americans  would  say,  bonds.  In  1888 
the  3%s  were  converted  into  2%%,  and  in  1903 
the  rate  was  reduced  to  2y2%.  The  official 
name  of  English  consols  is  Consolidated  An- 
nuities. 

CONTANGO.  This  is  a  London  Stock  Ex- 
change term  referring  to  the  charge  paid  by  a 
buyer  for  the  privilege  of  continuing  a  contract 
to  the  next  fortnightly  settlement.  For  in- 
stance, %  to  y$  contango  means  that  the  bull 
(who  is  long)  pays  to  the  jobber  y^%  for  the 
accommodation  and  the  bear  (who  is  short) 
receives  from  the  jobber  %%.  One-eighth 
contango  to  %  back  (abbreviation  for  "back 
wardation")  means  that  the  bull  pays  %%  and 
the  bear  pays  %%.  One-sixteenth  to  even 
means  that  the  bull  pays  1-16%  and  the  bear 
carries  over  "at  even,"  or  in  other  words,  pays 
nothing.  Contango  day  means  the  first  day 
of  settlement  on  the  London  Stock  Exchange, 
when  arrangements  are  made  to  continue  bar- 
gains or  contracts.  The  same  as  continuation 
day  or  making-up  day. 

CORNER.  A  corner  in  a  stock  is  created  by 
the  purchase  of  all  the  floating  or  purchasable 


THE  INVESTOR'S  PRIMER  55 

supply  of  a  given  stock,  after  which  the  price 
can  be  advanced  by  the  operators  of  the  corner 
at  will.  Speculators  who  are  short  of  the  stock 
and  are  unable  to  buy  or  borrow  to  make  de- 
livery to  buyers,  or  to  return  stock  which  they 
have  borrowed,  are  generally  said  to  the 
"squeezed."  In  other  words,  they  must  settle 
with  the  buyers  at  the  buyers'  terms.  Corners 
are  created  in  grain,  cotton,  coffee  and  other 
commodities  as  well  as  in  stocks. 

COUPON  BOND.  A  coupon  bond  is  a  bond 
which  is  payable  to  bearer  without  registration 
of  the  owner's  name,  and  carries  a  coupon 
covering  the  interest  on  the  bonds,  which  is 
clipped  at  each  interest  period  and  deposited 
for  collection,  the  same  as  a  check,  or  presented 
for  payment  at  the  office  of  the  corporation 
issuing  the  bond  or  the  corporation's  agent. 
The  great  majority  of  bonds  issued  by  steam 
railroads  and  other  corporations  for  sale  to  in- 
vestors are  coupon  bonds.  Coupon  bonds  are 
much  more  available  for  speculative  dealings 
and  for  selling  generally.  While  they  are,  of 
course,  no  better  secured  and  intrinsically 
worth  no  more  than  registered  bonds,  yet  they 
usually  are  quoted  at  a  fractionally  higher  price 
than  the  latter,  for  the  simple  reason  that  a 
change  in  ownership  involves  no  formal  trans- 


56  THE  INVESTOR'S  PRIMER 

fer  beyond  the  mere  delivery  of  the  bond  itself. 
In  many  cases  coupon  bonds  are  convertible  at 
the  option  of  the  holder  into  registered  bonds, 
and  in  some  instances  the  registered  bond  can 
be  converted  back  at  will  of  the  owner  into  a 
coupon  bond.  This  is  not,  however,  true  in  all 
cases.  Many  coupon  bonds  can  be  registered 
as  to  principal  but  not  as  to  interest. 

CUMULATIVE  DIVIDENDS.  This  term 
carries  the  same  meaning  as  accumulative  divi- 
dends. If  a  dividend  on  a  stock  is  accumula- 
tive it  implies  that  all  back  dividends  must  be 
paid  in  full  before  current  dividends  can  be 
paid.  In  other  words,  a  stock  on  which  the 
dividends  are  not  cumulative  can  omit  to  pay 
its  dividend  when  the  management  sees  fit 
and  in  another  year  begin  to  pay  a  current 
dividend  again  without  regard  to  the  period 
which  has  gone  by  during  which  no  dividend 
has  been  paid.  On  the  other  hand,  a  cumu- 
lative stock  must  sooner  or  later  pay  up  all 
back  dividends.  A  least  this  is  the  theory,  al- 
though naturally  if  a  company  does  not  earn 
the  money  to  make  the  payments  it  does  not 
pay  them,  and  the  back  dividends  simply  accrue 
from  year  to  year  on  the  stock.  See  also  ac- 
cumulative dividends. 


THE  INVESTOR'S  PRIMER  57 

CURRENT  ASSETS.  This  term,  as  used 
in  connection  with  the  balance  sheet  of  a  rail- 
road or  other  corporation,  covers  the  so-called 
shifting  or  changeable  assets  as  distinguished 
from  the  capital  assets.  In  the  case  of  the 
steam  railroad,  current  assets  usually  include 
cash  on  hand,  loans  and  bills  receivable,  ac- 
counts receivable,  amounts  due  from  other 
companies  and  individuals,  amounts  due  from 
companies'  agents,  advances  to  other  com- 
panies, etc.  The  capital  assets  as  distinguished 
from  the  current  include  cost  of  road  and 
equipment,  permanent  investments,  etc. 

CURRENT  LIABILITIES.  Current  lia- 
bilities as  distinguished  from  capital  liabilities 
of  a  railroad  or  corporation,  include  loans  and 
bills  payable,  accounts  payable,  payrolls  and 
vouchers,  interest  and  dividends  accrued, 
amounts  due  to  other  companies,  etc.  Capital 
liabilities,  on  the  other  hand,  cover  capital 
stock,  bonded  debt,  mortgages  assumed,  etc. 

CUTTING  A  MELON.  When  a  corpora- 
tion makes  a  large  extra  distribution  to  its 
stockholders  either  in  the  shape  of  an  extra 
large  cash  dividend  or  a  stock  dividend,  it  is 
usually  said  that  the  company  is  "cutting  a 
melon.* 


58  THE  INVESTOR'S  PRIMER 

DEBENTURE.  A  debenture,  or,  as  called 
in  this  country,  a  debenture  bond,  is  simply  a 
certificate  of  indebtedness  or  promise  to  pay 
issued  by  a  corporation.  In  other  words,  it  is 
not  a  mortgage.  It  usually  differs  from  the 
average  income  bond  in  that  it  contains  a 
promise  to  pay  a  certain  amount  of  interest  at 
stated  periods.  While  an  income  bond  is 
sometimes  a  mortgage  and  not  a  debenture, 
yet  as  it  cannot  be  foreclosed  before  maturity, 
which  may  be  50  years  away,  the  position  of 
the  principal  of  the  two  classes  of  bonds  is 
therefore  practically  the  same.  In  England  a 
debenture  bond  or  stock  is  sometimes  secured 
by  a  mortgage,  but  not  usually. 

DEFAULT.  A  default  on  a  bond  is  simply 
the  failure  to  perform  or  fulfil  the  obligation  to 
pay  the  interest  or  principal  when  due. 
Usually  a  default  furnishes  ground  for  appli- 
cation for  a  receivership,  although  in  some  in- 
stances mortgage  bonds  carry  a  clause  which 
does  not  allow  the  holder  to  begin  foreclosure 
proceedings  until  the  bond  has  defaulted  over 
a  certain  stated  period.  For  instance,  in  the 
case  of  the  United  States  Steel  Corporation 
second  mortgage  5s,  th'e  holder  could  not  be- 
gin foreclosure  proceedings  until  the  bond  had 


THE  INVESTORS  PRIMER  59 

been  in  default  in  the  payment  of  its  interest 
for  at  least  two  years. 

DISCRETIONARY  ACCOUNT.  In  stock 
speculation  a  discretionary  account  is  an  ac- 
count, the  handling  of  which  is  intrusted  to 
the  broker  with  whom  it  is  open.  While  there 
are  conditions  under  which  it  is  necessary  for 
a  broker  to  act  on  his  own  discretion,  yet  most 
reputable  brokerage  houses  dislike  to  do  this, 
and  many  of  them  refuse  to. 

DIVIDEND.  A  dividend  is  the  stockhold- 
ers' share  of  the  divisible  profits  of  a  corpora- 
tion, usually  paid  to  him  in  cash  at  certain 
stated  periods.  There  are,  of  course,  various 
conditions  under  which  dividends  are  paid,  and 
in  many  cases  they  are  not  paid  in  cash.  For 
instance,  a  "scrip"  dividend  is  one  payable  in 
scrip,  or  in  other  words  in  a  small  certificate 
bearing  interest  at  the  legal  rate  and  which  is 
usually  converted  into  stock,  but  has  no  voting 
power  and  is  entitled  to  no  dividend  until  con- 
verted into  stock.  A  stock  dividend,  however, 
is  one  payable  in  the  stock  of  the  company,  and 
is  large  enough  to  enable  the  holder  of  the 
stock  to  receive  a  full  certificate  and  not  frac- 
tions or  scrip.  Cash  dividends  are  usually  sent 
by  check  to  the  owner  of  the  stock,  in  whose 


60  THE  INVESTOR'S  PRIMER 

name  the  certificate  stands.  In  case  the  owner 
of  the  stock  has  not  had  his  certificate  trans- 
ferred to  his  name  before  the  closing  of  the 
books,  the  dividend,  of  course,  is  sent  to  the 
former  owner  and  he  must  pass  it  on  to  the 
new  owner.  When  a  speculator  is  short  of  a 
stock  on  which  a  dividend  becomes  due,  he  is 
obliged  to  pay  the  amount  of  the  dividend  to 
the  person  from  whom  he  has  borrowed  the 
stock  certificate  to  make  delivery  to  the  per- 
son to  whom  he  has  sold  the  stock. 

EQUITY.  The  equity  in  a  property  is  un- 
derstood to  be  the  difference  between  the 
value  of  the  property  mortgaged  or  otherwise 
encumbered  and  the  amount  of  the  obligation 
to  secure  which  the  property  is  pledged.  For 
instance,  the  equity  in  a  loan  is  the  difference 
between  what  the  securities  pledged  as  col- 
lateral are  worth  and  the  amount  borrowed  on 
them.  Securities  are  usually  accepted  as  col- 
lateral by  the  banks  at  about  80%  of  their 
market  value,  that  is,  the  lender  will  usually 
lend  $80,000  on  securities  of  the  market  value 
of  $100,000.  The  difference,  of  course,  between 
the  market  value  of  the  securities  and  the 
amount  of  the  loan  is  the  equity.  The  term 
equity  back  of  the  bonds  is  often  used  by 
dealers  in/  investment  securities,  and  refers 


THE  INVESTOR'S  PRIMER  61 

usually  to  the  total  market  value  of  all  the  se- 
curities which  may  be  junior  in  lien  or  position 
to  the  specific  security  which  is  referred  to. 
Thus,  if  a  property  has  secured  on  it  a  bond 
issue  of  $10,000,000  and  the  property  itself  has 
a  capital  stock  of  $40,000,000,  the  stock  being 
quoted  at  par,  then  the  equity  above  the  mort- 
gage is  about  $30,000,000.  If  the  stock  is 
quoted  at  150,  the  equity  above  the  mortgage 
would  presumably  be  about  $50,000,000. 

EXCHANGE.  The  word  exchange  in 
finance  refers  to  the  payment  of  an  obligation 
in  one  place  by  the  transfer  of  a  credit  from 
another  place.  By  this  operation  the  obliga- 
tion is  discharged  without  the  direct  borrow- 
ing of  money.  The  exchange  itself  is  an  order 
obtained  in  one  place  for  the  payment  of 
money  in  another  place.  There  is  really  no 
practical  difference  between  a  bill  of  exchange 
and  a  draft.  The  term  bill  of  exchange  is 
usually  applied  to  an  order  for  money  payable 
in  a  foreign  country,  whereas  the  term  draft 
is  applied  to  an  order  payable  within  the  coun- 
try of  its  origin. 

EX-DIVIDEND.  This  term  means  with- 
out or  not  including  a  dividend.  For  instance, 
dividends  on  stocks  are  usually  declared  pay- 


62  THE  INVESTOR'S  PRIMER 

able  on  a  certain  day  after  the  transfer  books 
of  the  corporation  have  closed.  This  may  be 
five  days  or  it  may  be  30  days.  During  this 
period  the  stock  cannot  be  transferred  from 
one  name  to  another,  and  it  therefore  sells  from 
that  time  on  at  a  new  price,  which  is  usually 
measured  by  the  amount  of  the  dividend  which 
has  been  declared  and  on  which  the  books  have 
closed.  Thus,  unless  specifically  arranged 
otherwise,  no  stock  during  this  period  will 
carry  the  dividend  which  will  be  mailed  when 
the  books  open,  as  the  dividend  goes  to  the 
owners  of  stock  of  record  on  the  day  the  books 
close. 

EX-INTEREST.  This  means  without  in- 
terest or  not  including  interest,  and  applies 
usually  to  bonds.  Registered  bonds  sell  ex- 
interest  in  the  same  way  that  stocks  sell  ex- 
dividend  when  the  books  are  closed.  In  the 
case  of  coupon  bonds  the  term  ex-coupon  is 
used  in  the  same  sense.  Of  course,  in  the  case 
of  coupon  bonds  no  books  are  closed,  and  the 
bonds  sell  ex-coupon  from  the  day  that  the 
coupon  is  paid  and  cut  off  the  bond. 

EX-RIGHTS.  A  stock  that  is  sold  ex-rights 
does  not  convey  to  the  buyer  the  privilege  to 


THE  INVESTOR'S  PRIMER  63 

participate  in  any  right  that  may  recently  have 
been  granted  to  the  stockholders. 

FIXED  CHARGE.  A  fixed  charge  is  one 
that  becomes  due  regularly  and  at  stated  in- 
tervals and  permanently.  For  instance,  in  the 
case  of  railroads,  fixed  charges  include  interest 
on  bonded  debt,  interest  on  floating  debt,  sink- 
ing fund  charges,  rentals,  taxes,  etc.  Failure  to 
pay  these  charges  usually  constitutes  a  legal 
default  and  cannot  be  deferred  except  by  agree- 
ment of  all  parties  concerned. 

FLAT.  The  term  flat  is  used  in  relation  to 
bonds  or  other  securities  which  are  sold  with- 
out interest.  That  is,  the  interest  is  not  com- 
puted and  added  to  the  price,  but  is,  to  a  more 
or  less  extent,  embraced  in  the  price  itself.  In 
other  words,  the  accrued  interest,  whatever  it 
may  amount  to,  is  included  in  the  net  figure 
which  is  named  as  the  price.  In  the  stock 
market,  when  stock  certificates  are  loaned  flat 
the  lender  does  not  have  to  pay  interest  to  the 
borrower  of  the  stock.  Ordinarily  the  bor- 
rower of  stock  pays  the  lender  the  market 
value  of  the  stock,  and  the  lender  pays  interest 
to  the  borrower  on  this  money.  When  a  stock 
is  lending  flat  it  signifies  that  this  particular 
stock  is  not  in  adequate  supply,  or  at  least  it 


64  THE  INVESTOR'S  PRIMER 

is  not  easy  to  obtain  by  borrowing.  When,  on 
the  other  hand,  a  stock  is  lending  at  a  pre- 
mium the  borrower  not  only  receives  no  inter- 
est on  the  money  that  he  advances  to  the 
lender,  but  he  also  has  to  pay  whatever  amount 
may  be  agreed  upon  for  the  use  of  the  stock. 
In  such  a  case  the  stock  is  very  scarce  on  the 
market  or  it  is  very  difficult  to  obtain. 

FLOATING  DEBT.  The  floating  debt  of 
a  corporation  is  the  unfunded  indebtedness; 
that  is,  indebtedness  not  represented  by  per- 
manent security.  Usually,  floating  debt  con- 
sists of  money  directly  borrowed ;  money  owed 
for  miscellaneous  purposes,  and  money  pay- 
able within  a  short  period. 

FOREIGN  EXCHANGE.  Foreign  Ex- 
change is,  briefly,  the  payment  of  an  obligation 
in  a  given  place  in  one  country  by  the  transfer 
of  a  credit  from  a  given  place  in  another  coun- 
try by  means  of  a  bill  of  exchange,  as  for  in- 
stance, a  bill  drawn  in  New  York  and  payable 
in  London. 

For  instance,  A  in  London  owes  $100,000 
or  the  equivalent  in  pounds  sterling  to  B  in 
New  York;  likewise  C  in  New  York  owes 
$100,000,  or  the  equivalent  of  that  sum,  to  D 
in  London. 


THE  INVESTOR'S  PRIMER  65 

A  in  London  buys  a  bill  of  exchange  on  New 
York  collectible  in  New  York,  for  the  amount 
of  his  obligation  and  forwards  it  to  B  in  New 
York;  likewise  C  in  New  York  buys  a  bill  of 
exchange  on  London  collectible  in  London  for 
the  amount  of  his  obligation  and  forwards  it 
to  B  in  London.  Thus,  both  A  and  C  have 
paid  what  they  owed,  while  B  and  D  have  re- 
ceived what  is  due  them,  and  no  money  has 
crossed  the  ocean  in  settling  the  accounts. 

A  merchant  in  New  York  usually  pays  for 
goods  bought  in  Paris  or  London  with  a  bill 
of  exchange  or  draft  purchased  from  a  bank 
or  banker  in  New  York,  which  is  payable  by 
the  correspondent  in  London  or  Paris,  as  the 
case  may  be,  of  the  New  York  bank  or  banker. 
The  bill  of  exchange  thus  saves  trouble,  time 
and  expense  to  the  remitter.  It  is  payable  in 
French  or  English  money  as  the  case  may  be, 
and  is  purchased  at  the  equivalent  in  United 
States  money.  Such  is  the  method  where  ex- 
change is  bought. 

Following  is  an  instance  where  exchange  is 
sold:  A  in  New  York  makes  a  shipment  of 
goods  to  B  in  London  for  which  immediate 
payment  is  to  be  made.  A  makes  out  a  draft 
on  B  for  the  amount  due  him  and  attaching 
to  the  draft  the  bill  of  lading  for  the  goods 
sells  the  draft  to  a  dealer  in  foreign  exchange 


66  THE  INVESTOR'S  PRIMER 

in  New  York,  who  forwards  it  to  his  corres- 
pondent in  London  for  collection  from  B. 
Thus,  A  receives  pay  for  his  goods  as  soon  as 
they  are  shipped,  and  does  not  have  to  first 
ship  the  goods,  then  wait  for  them  to  reach 
London  and  then  wait  for  a  ship  to  bring  back 
gold  in  payment  for  them,  nor  even  to  wait  for 
the  mail  to  bring  back  a  draft  bought  by  B  in 
London  on  some  bank  or  banker  in  New  York ; 
much  less  has  he  to  wait  for  B  to  receive  the 
goods,  draw  a  check  on  his  own  (B's)  bank  in 
London  and  send  it  to  him  (A  in  New  York) 
who  would  have  to  sell  the  check  to  some 
dealer  in  foreign  exchange  in  New  York.  B, 
on  the  other  hand,  by  receiving  the  bill  of 
lading  for  the  goods  when  the  draft  is  pre- 
sented to  him  for  payment,  knows  not  only 
that  the  goods  have  been  shipped  to  him  by  A, 
but  by  possession  of  the  bill  of  lading  holds 
actual  title  to  them. 

Bills  payable  on  demand  or  sight  are  called 
sight  bills;  bills  payable  in  ten  to  thirty  days 
are  called  short  bills ;  bills  payable  in  sixty  days 
or  in  a  longer  period  are  called  long  bills. 
There  are  also  cable  transfers  by  which  money 
(or  credit)  is  transferred  by  cable.  These  for 
brevity  are  called  cables.  Bills  drawn  by  banks 
or  bankers  against  their  credits  abroad  are 
called  bankers'  bills.  These  include  letters  of 


THE  INVESTOR'S  PRIMER  67 

credit.  Bills  drawn  against  shipments  of  com- 
modities or  manufactures  are  called  commer- 
cial bills.  Specifically,  grain-bills  are  drawn 
against  grain  shipped  and  cotton-bills  are 
drawn  against  cotton  shipped. 

FOUNDERS'  SHARES.  Shares  which  are 
sometimes  given  to  the  founders  and  pro- 
moters of  a  company;  such  shares  generally 
divide  the  surplus  profits  with  the  common 
shares  after  a  certain  percentage  has  been  paid 
on  the  latter.  These  shares  are  seldom  created 
in  this  country,  being  chiefly  the  result  of  an 
English  custom. 

FRANCHISE.  A  franchise  is  a  privilege 
conferred  by  grant  from  a  government  or  mu- 
nicipality to  a  corporation  or  an  individual. 
For  instance,  the  right  to  construct  a  railroad 
from  one  point  to  another  and  operate  the 
same  over  a  given  period  of  years  constitutes 
a  franchise.  Also,  a  privilege  given  to  a  street 
railway,  gas  or  electric  light  company  or  water 
company  to  operate  on  certain  streets  or 
within  certain  limits  for  a  given  period  more 
or  less  exclusively,  constitutes  a  franchise. 
These  franchises  are,  in  modern  times,  very 
largely  capitalized;  the  capitalization  being 
measured  by  the  value  given  to  the  property 


68  THE  INVESTOR'S  PRIMER 

through  its  earning  power.  This  earning 
power  is  of  course  fluctuating,  and  as  the  mu- 
nicipalities grow  the  earning  power  usually 
grows  also.  Therefore  the  franchise  value 
which  may  have  been  small  when  the  franchise 
was  granted,  sometimes  grows  to  a  very  vast 
extent.  Thus,  the  public  utility  franchises  of 
New  York  City,  many  of  which  were  of  doubt- 
ful value  when  granted,  have  grown  to  be  as- 
sets of  enormous  value  and  have  been  heavily 
capitalized. 

FUNDED  DEBT.  A  funded  debt  of  a  cor- 
poration is  a  debt  usually  running  some  years 
and  represented  by  one  or  more  issues  of 
bonds.  It  is  distinguished  from  floating  debt 
chiefly  by  its  relatively  permanent  character. 
While  a  floating  debt  may  represent  capital 
which  has  been  borrowed  for  permanent  uses, 
yet  a  funded  debt  nearly  always  represents  this. 
Funded  debt  is  also  a  term  used  for  the  liabili- 
ties of  the  British  government,  such  as  have 
been  issued  in  the  form  of  permanent  or  long- 
dated  securities,  as  distinguished  from  the 
floating  debt,  which  is  in  the  form  of  exchequer 
bonds  and  treasury  bills,  and  is  regarded  as 
temporary.  This  distinction,  however,  is  not 
always  clear,  as  the  English  War  Loan  issued 


THE  INVESTOR'S  PRIMER  69 

in  1900  and  payable  in  1910  is  called  a  floating 
debt,  but  should  be  rated  as  funded  debt. 

GOLD  BONDS.  A  bond  which  is  specifi- 
cally payable,  principal  and  interest,  in  gold. 
In  the  days  before  1896,  when  there  was  much 
doubt  in  the  minds  of  investors  as  to  the  prob- 
ability of  the  United  States  maintaining  the 
gold  standard,  corporations  found  it  necessary 
to  insert  what  was  called  the  gold  clause  in  the 
mortgages  they  issued.  Otherwise  investors 
would  not  so  readily  purchase  the  bonds  and 
it  was  difficult  to  float  any  issues  which  did  not 
include  the  gold  clause.  The  reason  for  this 
was  that  in  the  event  of  the  currency  system 
of  this  country  going  on  a  silver  basis  the  prin- 
cipal and  interest  of  the  bonds  would  have 
been  payable  in  this  depreciated  currency,  and 
the  investor  would  therefore  lose  possibly  one- 
half  of  his  principal.  At  the  present  time  the 
gold  clause  is,  of  course,  unnecessary,  as  there 
is  no  doubt  whatever  about  the  permanency  of 
the  gold  standard  in  this  country. 

GRANGER  RAILROADS.  This  is  the 
Wall  Street  name  which  is  given  to  the  rail- 
road systems  of  the  west,  like  the  Chicago, 
Burlington  and  Quincy,  Chicago,  Milwaukee 
&  St.  Paul,  Chicago  &  Northwestern,  Chicago 


70  THE  INVESTOR'S  PRIMER 

&  Alton,  Rock  Island,  etc.  These  railroads  are 
called  granger  roads  because  many  years  ago 
a  wide  agitation  was  carried  on  by  the  State 
Granges  in  the  particular  sections  where  these 
railroads  run.  The  grange  agitation  was  of 
such  national  interest  and  for  so  long  a  time 
affected  the  position  and  earning  of  these  par- 
ticular properties,  that  they  came  to  be  known 
as  the  granger  roads,  and  have  carried  the  name 
ever  since.  The  mere  fact  that  they  carried 
grain  had  nothing  to  do  with  this  particular 
appellation,  as  there  are  many  other  roads 
which  nowadays  carry  as  much,  if  not  more 
grain  than  these  systems  and  which  are  not 
included  among  the  grangers. 

G.  T.  C.  When  these  letters  are  used  with 
an  order  to  buy  or  sell  stock  or  commodities, 
they  mean  that  the  order  is  good  till  counter- 
manded or  good  till  cancelled. 

GUARANTEED  BONDS.  A  bond,  the 
payment  of  the  principal  and  interest  of  which 
is  guaranteed  by  another  corporation.  When 
a  railroad  leases  another  railroad  it  frequently 
guarantees  the  principal  and  interest  on  the 
bonds  of  the  leased  road.  Sometimes  this 
guarantee  is  shown  by  endorsement  on  the 


THE  INVESTOR'S  PRIMER  71 

bond  itself  and  sometimes  is  simply  provided 
for  in  the  lease. 

GUARANTEED  STOCK.  A  stock  the 
dividends  on  which  are  guaranteed  by  a  com- 
pany other  than  the  one  which  issued  the  stock. 
When  a  railroad  leases  another  road  it  fre- 
quently guarantees  the  dividends  on  the  stock 
of  the  leased  road. 

HOLDING  COMPANY.  This  is  the  same 
as  a  security  company.  That  is,  a  company 
which  owns  the  securities  of  other  companies 
and  depends  for  its  income  upon  the  interest 
and  dividends  yielded  by  these  securities.  It 
frequently  issues  bonds  as  well  as  stock  itself. 
Thf  most  notable  example  of  a  holding  com- 
pany in  the  railroad  field  was  that  of  the  North- 
ern Securities  Co.,  which,  however,  was  dis- 
solved as  being  illegal  by  the  United  States 
Courts.  It  planned  to  hold  the  stocks  of  the 
Great  Northern  and  Northern  Pacific  Railroad 
companies  and  possibly  of  other  companies 
also.  A  holding  company  is  frequently  also 
an  operating  company.  For  instance,  the 
Pennsylvania  Railroad  is  both  a  holding  com- 
pany and  an  operating  company.  It  operates 
several  thousand  miles  of  railroad  and  in  ad- 
dition holds  a  majority  of  the  stocks  and  many 


72  THE  INVESTOR'S  PRIMER 

other  securities  of  a  large  number  of  other 
railroads.  On  the  other  hand,  the  Pennsyl- 
vania Company  of  Pittsburg,  itself  controlled 
through  stock  ownership  by  the  Pennsylvania 
Railroad,  is  a  pure  holding  company,  and 
simply  holds  the  stocks  and  certain  other  se- 
curities of  the  various  Pennsylvania  lines  west 
of  Pittsburg  and  Erie.  The  New  York  Central 
Railroad  is  a  holding  company  as  well  as  an 
operating  company.  This  is  also  true  of  all 
the  large  systems  such  as  the  New  Haven,  the 
Union  Pacific,  Baltimore  &  Ohio,  Illinois  Cen- 
tral, etc.  The  Reading  Company  on  the  other 
hand,  is  simply  a  holding  company,  and  holds 
a  majority  of  the  stocks  of  railroads  like  the 
Philadelphia  &  Reading,  New  Jersey  Central, 
as  well  as  the  stocks  of  certain  coal  and  iron 
companies  in  the  anthracite  coal  fields. 

HYPOTHECATION.  This  implies  the 
pledging  of  securities  or  other  property  as  col- 
lateral for  loans.  When  securities  are  pledged 
for  a  loan  the  title  to  them  is  surrendered  for 
the  time  being  to  the  bank  or  lender  with 
which  or  with  whom  they  are  pledged.  On  the 
London  Stock  Exchange  stock  or  securities 
pledged  as  collateral  are  said  to  be  pawned. 

INCOME  ACCOUNT.  This  is  the  revenue 
account,  and  in  the  case  of  most  corporations 


THE  INVESTOR'S  PRIMER  73 

it  embraces  such  items  as  gross  earnings,  oper- 
ating expenses,  net  earnings,  income  from 
other  sources,  fixed  charges  and  other  deduc- 
tions for  dividends,  dividend  charges  and  sur- 
plus. 

INCOME  BASIS.  The  income  basis  of  an 
investment  is  the  percentage  of  return  on  the 
price.  As  for  example,  the  percentage  that  the 
interest  on  a  bond  or  the  dividend  on  a  stock 
equals  when  calculated  on  the  cost  of  the  bond 
or  stock.  A  stock  paying  6%  which  is  bought 
at  120  yields  5%,  therefore,  this  stock  at  120 
is  on  a  5%  basis. 

INCOME  BOND.  A  bond  that  is  pre- 
sumably a  lien  on  the  net  income  or  earnings 
of  a  corporation  after  all  prior  charges  have 
been  paid.  It  receives  interest  only  when 
earned,  and  is  somewhat  similar  in  character 
and  position  to  a  preferred  stock,  with  the  ex- 
ception that  a  preferred  stock  usually  has 
voting  power.  An  income  bond  is  not  usually 
a  mortgage,  and  even  when  it  is,  it  cannot  be 
foreclosed  before  maturity,  provided  the  pro- 
visions regarding  interest  payments  on  earn- 
ings are  technically  adhered  to. 

IRREDEEMABLE  BOND.  A  bond  which 
cannot  be  redeemed  or  paid  off,  but  the  interest 


74  THE  INVESTOR'S  PRIMER 

on  which  goes  on  forever.  There  have  been 
many  such  issues  made  by  European  govern- 
ments and  municipalities,  but  very  few  have 
been  issued  in  this  country. 

JOINT  BOND.  A  bond  in  which  the  pay- 
ment of  the  principal  and  interest  is  assumed 
by  two  or  more  parties  or  corporations  who  are 
jointly  bound.  There  are  many  such  issues 
among  railroad  bonds.  The  most  frequent  in- 
stances are  where  two  or  more  railroads  use 
the  same  station  or  terminal  property  at  a 
given  point,  and  jointly  issue  a  mortgage  for 
the  purpose  of  expanding  or  improving  the 
said  property.  The  bond  is  usually  issued  by 
the  terminal  company  itself,  and  then  jointly 
guaranteed  as  to  both  principal  and  interest 
by  the  railroad  companies  which  use  the  prop- 
erty. 

KAFFIRS.  This  is  the  London  Stock  Ex- 
change name  for  all  shares  of  South  African 
mining,  land,  industrial  and  other  companies. 

KANGAROOS.  This  is  the  London  Stock 
Exchange  name  for  shares  of  all  West  Aus- 
tralian mining,  land,  industrial  and  other  com- 
panies. 


THE  INVESTOR'S  PRIMER  7S 

KITING.  Kiting  is,  simply  stated,  the  in- 
curring of  a  fresh  obligation  to  discharge  an 
old  one.  The  commonest  form  of  kiting  is  by 
means  of  checks.  For  example,  a  depositor 
in  a  bank  has  issued  a  check  which  overdraws 
his  account.  He  makes  out  another  check, 
obtains  cash  for  it  elsewhere  than  at  the  bank, 
and  deposits  the  cash  in  the  bank  in  time  to 
meet  the  first  check.  Two  or  three  days  may 
elapse  before  the  second  check  reaches  the 
bank,  and  before  its  arrival  another  check  has 
been  made  out  and  the  cash  obtained  for  it  and 
deposited.  So  the  process  may  continue. 

A  person  engaged  in  kiting  may  arrange  to 
exchange  checks  with  one  or  more  persons,  and 
thus  enlarge  the  circle  of  operations  to  greater 
and  greater  degrees.  He  may  also  gain  time 
by  sending  his  checks  to  other  places  which  are 
remote  from  his  bank.  It  is  unnecessary  to  say 
that  check  kiting  is  illegal. 

LISTED  STOCKS.  Stocks  which  have 
been  placed  on  the  regular  list  of  the  New 
York  Stock  Exchange  or  other  stock  ex- 
changes, and  are  thereby  admitted  to  dealings 
on  the  exchanges,  are  commonly  known  as 
listed  stocks.  In  the  case  of  the  New  York 
Stock  Exchange  there  are  two  classes  of 
stocks;  those  known  as  listed  securities  and 


76  THE  INVESTOR'S  PRIMER 

those  known  as  unlisted  securities.  In  order 
that  a  security  may  be  listed  certain  rules  must 
be  conformed  to  by  the  company  making  the 
application,  these  rules  bearing  particularly 
upon  the  financial  statement  submitted  by  the 
company.  With  the  unlisted  securities,  how- 
ever, the  case  is  somewhat  different.  The  lat- 
ter are  not  obliged  to  submit  details  regarding 
their  earnings  or  financial  condition.  In  the 
method  or  scope  of  dealings  on  the  floor  of  the 
exchange  there  is,  however,  no  difference  be- 
tween listed  and  unlisted  securities. 

LOMBARD  STREET.  A  street  in  London, 
located  in  the  financial  district.  The  name 
Lombard  Street,  however,  applies  to  the  whole 
banking  center  of  London.  The  name  was 
probably  originally  given  to  the  street  for  the 
reason  that  some  of  the  Lombard  Jews,  who 
began  banking  in  Italy  in  the  Ninth  Century, 
afterwards  went  to  London  and  settled  in  this 
particular  locality. 

LONDON  QUOTATIONS.  A  quotation 
on  the  London  Stock  Exchange  means  the 
price  at  which  the  jobber  or  dealer  will  either 
buy  or  sell.  Thus,  when  a  jobber  quotes 
99%— 100%  it  means  that  he  will  buy  at  99% 
or  will  sell  at  100%.  When,  in  giving  a  quota- 


THE  INVESTOR'S  PRIMER  77 

tion  the  "middle  price"  is  named,  it  means  the 
price  midway  between  the  jobber's  buying  and 
selling  price.  In  the  above  quotation  the 
middle  price  would  be  100.  On  the  New  York 
Stock  Exchange,  on  the  other  hand,  the  quo- 
tations (except  "bid"  and  "asked")  are  the 
prices  at  which  actual  transactions  take  place, 

LONG  ACCOUNT.  This  term  designates 
a  stock  or  other  account  on  the  ledger  o£  a 
broker  which  shows  one  or  more  purchases 
made  in  expectation  of  a  rise  in  the  price  oi  the 
particular  security  which  is  in  the  account. 
The  same  term  also  applies  to  similar  pur- 
chases of  grain,  cotton,  coffee,  etc.  It  is  just 
the  reverse  of  "short  account,"  the  latter  desig- 
nating securities  sold  "short." 

MANIPULATION.  In  speculation  this 
term  is  applied  in  a  broad  sense,  to  the  various 
operations  employed  for  the  working  of  stock 
or  other  quotations  up  or  down,  or  both  ways* 
as  the  case  may  be.  Among  the  familiar 
methods  employed  for  thus  affecting  the  prices 
of  securities,  is  the  dissemination  of  reports* 
sometimes  true  and  sometimes  false,  to  affect 
the  prices  of  particular  stocks;  the  circulation 
of  rumors,  coloring  of  news  or  suppression  of 
facts.  In  the  sensitive,  mercurial  atmosphere 


78  THE  INVESTOR'S  PRIMER 

of  Wall  Street,  rumors  are  often  most  potent 
in  affecting  stock  quotations,  and  often  prices 
are  temporarily  changed  to  a  very  absurd  and 
abnormal  extent  by  such  methods.  In  addition, 
there  are  other  more  positive  ways  of  manipu- 
lating prices,  a  favorite  one  being  what  is 
known  as  "wash  sales."  "Washing"  in  Wall 
Street  consists  of  buying  and  selling  a  given 
security  at  the  same  price  and  at  the  same 
time.  The  operator  wishes  to  advance  a  stock 
in  price  and  gives  to  one  broker  an  order  to 
bid  the  stock  up  on  a  scale ;  that  is  to  say,  the 
broker  is  instructed  to  offer  to  buy  a  certain 
amount  of  stock,  bidding  for  each  lot  J4  of  one 
per  cent,  above  the  last  price  paid.  At  the 
same  time,  the  operator  gives  another  broker 
an  order  to  sell  the  same  amount  of  stock  at 
similar  prices.  Thus,  other  things  not  inter- 
fering, the  operator  raises  the  price  of  the  stock 
without  actually  buying  anything.  If,  on  the 
other  hand,  the  operator  desires  to  depress  the 
price  of  a  stock,  similar  methods  are  employed, 
except  that  they  are  reversed. 

Pools  are  often  formed  in  Wall  Street  to 
manipulate  stocks,  in  which  cases,  everything 
is  usually  done  on  a  much  more  comprehensive 
scale  than  when  only  a  single  operator  is 
carrying  on  the  washing  process. 


THE  INVESTOR'S  PRIMER  79 

MARGIN.  The  money  deposited  with  a 
toanker  or  broker  by  an  operator  or  speculator 
in  stocks  or  in  grain,  cotton,  coffee,  and  so 
forth,  to  protect  the  broker  against  loss.  In 
•other  stocks  the  amount  of  margin  required 
by  a  broker  varies  from  5%  to  20%  of  the  par 
value,  according  to  the  kind  of  security  dealt 
in,  or  the  character  of  trading  done.  The  aver- 
age margin  is  10%,  which  is  equal  to  $1,000 
on  100  shares  of  stock,  or  on  $10,000  of  bonds. 

Stocks  or  bonds  bought  on  margin  by  a 
broker  for  a  customer  are  at  all  times,  in  the 
absence  of  an  agreement  to  the  contrary,  sub- 
ject to  the  order  of  the  customer.  A  customer 
has  the  right  to  demand  delivery  at  any  time 
of  the  securities  upon  payment  of  the  amount 
owing  on  them,  including  commissions,  inter- 
est and  any  other  proper  expenses  or  charges. 
At  the  same  time,  unless  there  is  a  specific 
agreement  to  the  contrary,  the  broker  may  at 
any  time,  upon  giving  proper  formal  notice,  re- 
%quire  the  customer  to  "take  up";  that  is,  pay 
in  full  for  the  stocks  or  other  securities  which 
are  being  carried.  If  the  customer  is  short  of 
stocks  the  broker  may  demand  that  he  buy  the 
stocks  or  otherwise  close  out  his  account. 

When  100  shares  of  stock  is  bought  at  the 
New  York  Stock  Exchange  on  a  10%  margin 
(the  price  being  $100  per  share),  the  broker 


80  THE  INVESTOR'S  PRIMER 

executing  the   order  receives   the  stock  and 
pays  $10,000  for  it  to  the  broker  from  whom  it 
is  purchased.     The  buying  broker  having  re- 
ceived only  $1,000  from  his  customer,  thus  ad- 
vances $9,000  additional,  which  he  treats  as  a 
loan  to  the  customer,  holding  the  stock  as  se- 
curity for  the  money  so  advanced.     On  the 
amount  of  money  so  advanced  he  charges  the 
current  rate  of  interest.    Should  the  stock  be 
later  sold  at  115,  $11,500  could  be  received  for] 
it.     The  gross  profit  on  such  a  transaction" 
would  be  $1,500,  but  from  this  amount  would 
be  deducted  the  broker's  commission  and  the 
interest  on  the  money  advanced  by  the  broker. 
In  the  event  of  a  stock  declining  below  the 
purchase  price,  the  customer  is  of  course  re- 
quired to  deposit  more  margin.    If  he  fails  to 
do  this,  the  broker  has  the  right  to  "sell  him 
out";  that  is  to  say,  to  sell  the  stock  for  what 
it  will  bring,  after  which  he  will  return  to  the 
customer  whatever  balance,  if  any,  is  due  the 
latter,  less  whatever  commissions,  interest  or 
other  expenses  that  may  have  properly  been* 
charged. 

If  a  speculator  sells  a  stock  short  he  deposits 
margin  the  same  as  he  does  when  he  buys  a 
stock.  If  the  stock  is  sold  at  100  and  is  bought 
back  at  90  the  speculator's  profit  would  be 
$1,000,  less  the  broker's  commission.  Should 


THE  INVESTOR'S  PRIMER  81 

the  stock  advance  to  any  considerable  extent, 
the  customer  is,  of  course,  required  to  deposit 
sufficient  additional  cash  to  keep  his  margin 
intact;  in  the  event  of  his  failure  so  to  do,  the 
broker  may  close  him  out  by  buying  in  the 
stock  at  the  lowest  price  and  settling  the  dif- 
ference, if  any,  less  the  commission,  etc. 

MATCHED  ORDER.  A  Wall  Street  term, 
which  means  an  order  to  buy  and  sell  the  same 
stock;  such  an  order  is  usually  employed  for 
the  purpose  of  artificially  raising  or  lowering 
the  price  of  a  stock.  It  is  the  same  as  stock- 
watering. 

MILEAGE.  Means  length  or  distance  in 
miles.  The  road  mileage  of  a  railroad  is  the 
length  in  miles  of  the  railroad  itself.  Track 
mileage  is  the  length  in  miles  of  the  tracks  of 
the  railroad,  each  mile  of  double  track  being 
counted  as  two  miles;  side  tracks  and  switch- 
ing tracks  also  being  counted  and  included  in 
the  mileage.  Track  miles  means  the  same  as 
track  mileage. 

Train  mileage  is  the  number  of  miles  trav- 
ersed by  a  particular  train;  or  the  number  of 
miles,  collectively,  traversed  by  all  trains  of  a 
railroad.  The  result  attained  by  adding  to- 
gether the  number  of  miles  traversed  by  all 


82  THE  INVESTOR'S  PRIMER 

trains  and  dividing  'by  the  number  of  trains 
shows  the  average  number  of  miles  traversed 
by  each  train.  Train  miles  means  the  same  as 
train  mileage. 

Car  mileage  is  the  number  of  miles  trav- 
ersed by  a  particular  car;  or,  again,  it  is  the 
number  of  miles,  collectively,  traversed  by  all 
cars.  The  result  attained  by  adding  together 
the  number  of  miles  traversed  by  all  cars  and 
divided  by  the  number  of  cars  shows  the  aver- 
age number  of  miles  traversed  by  each  car. 
Car  miles  means  the  same  as  car  mileage. 

Ton  mileage  is  the  number  of  miles  the  whole 
number  of  tons  are  hauled.  The  average  num- 
ber of  miles  each  ton  is  hauled  (transported) 
is  ascertained  by  adding  together  the  number 
of  miles  each  ton  is  hauled  and  then  dividing 
by  the  number  of  tons.  Ton  miles  means  the 
same  as  ton  mileage. 

Passenger  mileage  means  the  number  of 
miles,  collectively,  traveled  by  all  passengers. 
The  number  of  miles  traveled  by  all  pas- 
sengers, divided  by  the  number  of  passengers 
shows  the  average  number  of  miles  traveled 
by  each  passenger.  Passenger  miles  means  the 
same  as  passenger  mileage. 

MIXED  LOAN.  A  loan  secured  by  col- 
lateral of  different  character,  as  railroad  ami 


THE  INVESTOR'S  PRIMER  83 

industrial   stocks,   instead   of   railroad  stocks 
alone  or  industrial  stocks  alone. 

MONETARY.  Pertaining  to  money  or 
finance;  consisting  of  money;  financial;  pe- 
cuniary; as  monetary  convention,  monetarjj 
union,  etc. 

MONETARY  STANDARD.  The  standard 
of  value  established  by  law  as  the  basis  for 
the  money  of  a  country.  By  long  process  of 
evolution  or  natural  selection  gold  and  silver 
have  been  left  in  possession  of  the  field  to  the 
exclusion  of  everything  else,  and  now  all  the 
monetary  systems  of  the  world  are  based  on 
one  or  the  other  or  both  together.  Gold, 
however,  is  rapidly  becoming  the  universal 
standard  in  law  as  it  has  been  in  fact  for  many 
years. 

Great  Britain  first  adopted  the  gold  stand- 
ard (1816).  One  by  one  the  nations  have  fal- 
len into  line,  the  United  States  as  recently  as 
1900,  leaving  the  Latin  Union  as  the  most  im- 
portant representative  of  the  double  standard 
system,  while  the  use  of  silver  is  practically 
confined  to  the  Far  East  and  to  Mexico  and 
some  parts  of  Central  and  South  America. 

The  bimetallic  system  in  its  unrestricted 
form  has  proved  a  failure  owing  to  the  wide 


84  THE  INVESTOR'S  PRIMER 

variation  in  value  between  gold  and  silver,  and 
no  nation  any  longer  undertakes  to  coin  both 
gold  and  silver  in  unlimited  quantities.  The 
countries  which  still  retain  nominally  the 
double  standard,  place  severe  restrictions  on 
the  use  of  silver,  and  mint  it  only  on  govern- 
ment account,  while  gold  is  coined  as  freely  as 
it  is  offered. 

Thus,  gold  has  become  practically  the  stand- 
ard of  the  world,  for  not  only  do  the  double 
standard  countries  restrict  the  use  of  silver  for 
the  purpose  of  keeping  their  silver  money  at  a 
parity  with  gold,  but  the  silver  standard  coun- 
tries in  all  international  transactions  are 
forced  to  use  gold  as  the  basis  of  exchange. 

The  value  of  a  gold  coin  depends  on  the 
amount  of  pure  gold  it  contains;  therefore, 
governments  in  establishing  their  monetary 
standard  and  monetary  unit  declare  by  law  the 
weight  and  quantity  of  the  coin  in  which  values 
are  to  be  measured.  Thus,  in  the  United 
States,  where  gold  is  the  standard  and  the  dol- 
lar the  unit,  it  is  enacted  that  a  gold  dollar 
shall  contain  23.2  grains  of  pure  gold  and  2.6 
grains  of  alloy,  making  the  weight  of  the  dollar 
25.8  grains  of  standard  gold  .900  fine.  In  Great 
Britain  the  unit  is  the  sovereign  or  pound 
sterling  and  contains  113  grains  of  pure  gold 
and  10.27  grains  of  alloy,  making  the  standard 


THE  INVESTOR'S  PRIMER  85 

of  fineness  .916  2-3  instead  of  .900  as  in  the 
United  States  and  most  other  gold-using  coun- 
tries. 

MONEY  BROKER.  A  dealer  in  coin  and 
paper  money  and  in  foreign  money;  also  one 
who  borrows  and  lends  money  for  others. 

The  regular  commission  of  a  money  broker 
for  negotiating  a  time  loan  (a  loan  for  a  speci- 
fied time)  is  1-32  of  1%  of  the  amount  bor- 
rowed or  $31.25  on  $100,000.  The  commission 
is  paid  by  the  borrower. 

A  money  broker  receives  nothing  from  the 
borrower  or  the  lender  for  effecting  a  call 
loan.  The  reason  is  that  a  call  loan  may  con- 
tinue for  a  day  only.  The  broker  expects  the 
free  negotiation  of  call  loans  to  bring  business 
to  him  when  the  borrower  on  call  becomes  a 
borrower  on  time. 

MONEY  MARKET.  This  is  a  term  ap- 
plied to  the  business  of  lending  money  and  not 
to  a  place  where  money  is  loaned,  for  there  is 
no  specific  place  (in  New  York)  for  lending 
money. 

In  New  York  the  banks,  trust  companies 
and  insurance  companies  are  the  chief  lenders 
of  money,  but  there  are  other  corporations  and 
not  a  few  firms  and  individuals  who  are  lend- 


86  THE  INVESTOR'S  PRIMER 

ers.  As  in  every  other  market,  supply  and  de- 
mand are  the  factors  which  determine  prices, 
or  in  other  words,  the  rates  exacted  for  the  use 
of  money.  If  the  demand  is  large  and  the 
supply  small,  rates  are  high;  if  the  demand  is 
small  and  the  supply  large,  rates  are  low. 

Money  is  stiff  when  it  commands  high  rates 
of  interest.  It  is  tight  when  it  is  difficult-  to 
obtain  even  at  high  rates;  in  these  circum- 
stances there  is  a  pinch  or  stringency  in  money. 
There  is  a  squeeze  in  money  when  it  cannot  be 
borrowed  except  at  exorbitant  rates;  in  a 
squeeze  a  premium  as  well  as  interest  is  ex- 
acted on  call  loans.  A  premium  of  %%  a  day 
and  interest  (at  the  rate  of  6%)  figuring  on 
the  customary  basis  of  365  days  in  a  year, 
means  a  rate  equal  to  52%  a  year. 

MONEY  RATES.  Means  the  rates  of  in- 
terest at  which  money  is  lending.  There  are 
different  rates  for  call  money  (money  loaned 
on  call — that  is,  returnable  on  the  demand  of 
the  lender)  and  time  money  (money  loaned  on 
time — that  is,  loaned  for  a  specified  period). 
The  rates  for  call  money  are  usually  lower 
than  those  for  time  money.  For  additional  in- 
formation see  Call  loan;  also  see  Time  loan. 

MONOMETALISM.     Exists  in  a  country 


THE  INVESTOR'S  PRIMER  87 

when  the  currency  of  the  country  is  based  on  a 
single  metal,  as  either  gold  or  silver. 

MORTGAGEE.  The  grantee  under  a 
mortgage;  the  one  to  whom  the  mortgage  is 
executed. 

MOVABLE  EXCHANGE.  If  foreign  ex- 
change is  quoted  and  also  is  payable  in  the 
money  of  the  country  where  collection  is  to  be 
made,  it  is  called  movable  exchange.  For  in- 
stance, exchange  on  Paris  is  quoted  in  francs 
in  New  York  and  is  therefore  movable  ex- 
change. The  dollar  is  the  basis  and  the  franc 
fluctuates  instead  of  the  dollar  in  which  it  is 
reckoned.  The  opposite  of  movable  exchange 
is  fixed  exchange. 

MUNICIPAL  BONDS.  Those  issued  by  a 
borough,  town  or  city  possessed  of  a  charter  of 
incorporation  conferring  privileges  of  local 
self-government. 

NATIONAL  DEBT.  Same  as  public  debt; 
the  debt  due  from  a  nation  to  individual  credi- 
tors. 

The  national  debt  of  the  United  States  con- 
sists of  bonds,  United  States  notes  (green- 
backs), old  demand  notes  (notes  issued  prior 


88  THE  INVESTOR'S  PRIMER 

to  the  present  United  States  notes),  national 
bank  notes  for  the  redemption  of  which  money 
has  been  deposited  by  the  issuing  banks,  frac- 
tional currency,  gold  certificates,  silver  certifi- 
cates and  Treasury  notes  (issued  for  the  pur- 
chase of  silver  bullion). 

NET.  Clear  of  all  charges  or  deductions  as 
actual  profit  or  actual  loss.  The  net  earnings 
of  a  stock  company  are  the  earnings  left  after 
deducting  expenses. 

Brokers  on  the  outside  or  curb  market  in 
stocks  often  take  an  order  net,  which  means 
that  the  customer  will  deliver  or  receive  the 
stock,  as  the  case  may  be,  at  a  fixed  price. 
The  broker  receives  no  commission  but  is  al- 
lowed to  make  as  much  on  the  transaction  for 
himself  as  he  can. 

NEW  YORK  CLEARING  HOUSE  ASSO- 
CIATION. The  official  title  of  the  organiza- 
tion under  which  the  associated  banks  of  New 
York  conduct  daily  clearings. 

The  association  was  organized  September 
13,  1853,  and  clearings  were  begun  on  October 
11  in  the  basement  of  No.  14  Wall  Street.  The 
first  day's  clearings  amounted  to  $22,648,109.87 
and  the  balances  to  $1,290,572.38.  The  number 
of  banks  making  clearings  was  52.  The  first 


THE  INVESTOR'S  PRIMER  89 

manager  was  George  D.  Lyman,  who  had  been 
a  teller  in  the  Bank  of  North  America.  The 
association  now  owns  the  handsome  white 
marble  building  Nos.  79  to  83  Cedar  Street. 

NEW  YORK  STOCK  EXCHANGE.    The 

New  York  Stock  Exchange  is  an  unincorpo- 
rated voluntary  association,  and  while  it  is  not 
a  corporation  neither  is  it  a  partnership.  It 
exists,  however,  under  a  written  constitution 
and  by-laws.  Neither  the  constitution  of  the 
New  York  Stock  Exchange  nor  the  rules  and 
regulations  of  the  London  Stock  Exchange  in 
express  terms  state  the  object  for  which  those 
bodies  were  organized,  but  they  are  so  mani- 
fest that  a  statement  of  them  has  not  been 
deemed  essential. 

The  New  York  Stock  Exchange  has  its 
origin  in  an  agreement  dated  May  17,  1792,  by 
"Brokers  for  the  Purchase  and  Sale  of  Public 
Stock."  By  public  stock  was  meant  govern- 
ment securities;  in  other  words,  government 
bonds.  At  that  time  the  brokers  met  and  did 
business  under  a  buttonwood  tree  that  stood 
in  front  of  the  dividing  line  between  the  present 
Nos.  68  and  70  Wall  Street.  In  1817  a  consti- 
tution was  adopted  under  the  name  "New 
York  Stock  and  Exchange  Board."  On  Janu- 


90  THE  INVESTOR'S  PRIMER 

ary  29,  1863,  the  present  name,  "New  York 
Stock  Exchange,"  was  adopted. 

The  membership  of  the  New  York  Stock  Ex- 
change is  limited  to  1,100.  The  admission  fee 
is  $2,000,  but  this  is  in  addition  to  the  cost  of 
a  membership  itself,  which  depends  on  the 
"state  of  the  market"  for  seats,  as  member- 
ships are  called.  A  membership  is  obtained  by 
buying  the  seat  of  a  retiring,  deceased  or  ex- 
pelled member.  A  member  is  elected  for  life, 
or  until  he  resigns  or  is  expelled. 

Expulsion  from  the  exchange  forfeits  mem- 
bership, but  not  the  proceeds  of  it.  Tempo- 
rary insolvency  involves  suspension.  Perma- 
nent insolvency  involves  loss  of  membership, 
and  the  proceeds  of  the  membership  are  ap- 
plied to  the  payment  of  the  claims  of  creditors 
wha  are  members  of  the  exchange.  If  there 
is  a  surplus,  it  goes  to  the  member  or  to  his 
assignee,  if  he  has  been  declared  a  bankrupt. 

When  a  member  dies  his  seat  may  be  dis- 
posed of  by  the  committee  on  admission  and 
the  proceeds  delivered  to  his  executor  or  the 
administrator  of  his  estate. 

NEW  YORK  STOCK  EXCHANGE 
CLEARING  HOUSE.  The  place  where  the 
differences  in  the  accounts  of  the  brokers  on 
the  New  York  Stock  Exchange  are  settled. 


THE  INVESTOR'S  PRIMER  91 

Before  the  establishment  of  the  clearing 
house  a  broker  who  had  made  sales  of  stock 
was  obliged  to  send  the  stocks  to  the  office  of 
the  various  purchasers  and  collect  payment 
from  them.  At  the  same  time  brokers  from 
whom  he  had  bought  stocks  were  obliged  to 
send  the  stocks  to  his  office  and  collect  pay- 
ment from  him.  A  broker  may  have  made 
sales  to  the  amount  of  $500,000,  and  purchases 
to  the  amount  of  $475,000.  He  was  compelled 
to  make  collections  and  payments  for  the  full 
amounts,  whereas  under  a  clearing  house  plan 
he  might  have  settled  all  the  transactions  in 
one  operation,  and  by  the  payment  of  only  the 
difference  of  $25,000. 

Now,  a  broker,  at  the  end  of  each  day,  makes 
up  a  sheet  called  a  clearing  house  sheet,  con- 
taining his  purchases  and  sales.  On  one  side 
of  the  sheet  (the  left  hand  side),  the  broker 
puts  down  his  purchases,  each  purchase  having 
a  line  for  itself.  In  each  transaction  the  name 
of  the  broker  from  whom  the  purchase  was 
made  comes  first  and  then  in  order  follow  the 
numbers  of  shares,  the  name  of  the  stock,  the 
price  at  which  purchased,  and  finally,  the 
amount  in  dollars  of  the  purchase.  This  side 
of  the  sheet  is  headed  "Received  from,"  mean- 
ing that  the  broker  has  contracted  to  receive 
the  stocks  enumerated. 


92  THE  INVESTOR'S  PRIMER 

The  other  side  of  the  sheet  (the  right  hand 
side)  contains  the  list  of  stocks  sold  (made  out 
in  the  same  order  as  the  list  of  stocks  bought), 
and  this  side  of  the  sheet  is  headed  "Delivered 
to,"  meaning  that  the  broker  has  contracted  to 
deliver  the  stocks  enumerated. 

If  his  purchases  amount  in  money  to  more 
than  his  sales,  he  accompanies  his  sheet  with 
a  check  drawn  on  his  own  bank  and  payable  to 
the  clearing  house  bank  (a  bank  in  which  the 
clearing  house  account  is  kept).  If  his  sales 
amount  in  money  to  more  than  his  purchases 
he  accompanies  his  sheet  with  a  draft  on  the 
clearing  house  bank,  which  is  accepted  by  the 
manager  of  the  clearing  house  (made  collect- 
able by  the  indorsement  of  the  manager) .  This 
draft  is  returned  to  the  broker  and  is  deposited 
by  him  in  his  own  bank  for  collection  in  the 
ordinary  course. 

If  the  broker  has  bought  more  of  any  par- 
ticular stock  than  he  has  sold  or  sold  more 
than  he  has  bought,  there  is  a  stock  difference 
(as  well  as  a  money  difference)  to  be  settled, 
but  the  settlement  of  this  stock  difference  is 
provided  for  when  the  sheet  is  made  up.  If, 
for  instance,  the  broker  has  bought  200  shares 
of  a  certain  stock  and  has  sold  100  shares  he 
receives  the  difference  or  balance  of  stock, 
which  is  100  shares.  Some  other  broker  who 


THE  INVESTOR'S  PRIMER  93 

sold  100  shares  more  of  the  stock  in  question 
than  he  bought  is  directed  toy  the  manager  of 
the  clearing  house  to  deliver  this  extra  100 
shares  to  the  first  broker.  The  first  broker 
credits  himself  on  his  sheet  with  the  amount 
in  money  of  this  stock  at  the  settling  price, 
while  the  second  broker  charges  himself  with 
the  amount  of  it  on  his  sheet. 

The  settling  price  is  an  arbitrary  price  fixed 
by  the  manager  of  the  clearing  house.  Each 
day  at  the  close  of  business  the  manager  of  the 
clearing  house  sends  out  through  the  ticker  the 
settling  prices  for  the  various  stocks  for  the 
use  of  brokers  in  making  up  their  clearing 
house  sheets.  In  their  use  in  making  up  the 
sheets  they  are  called  making-up  prices;  in 
their  use  in  making  settlements  they  are  called 
settling  prices.  These  settling  prices  are  the 
even  prices  next  nearest  to  the  last  prices  of  the 
day.  Thus,  if  the  last  price  of  a  stock  was 
99^4  or  100/4  the  settling  price  would  be  100. 

The  broker  who  bought  200  shares  may  have 
bought  them  at  99^,  and  the  100  shares  which 
he  sold  may  have  been  sold  at  100^.  If  the 
settling  price  was  100,  he  would  put  down  the 
extra  100  shares  due  him  in  the  sold  column 
at  100,  the  same  as  if  he  actually  had  sold  the 
stock  at  100. 


94  THE  INVESTOR'S  PRIMER 

Then  his  account  would  figure  out  thus: 
Bought  200  at  99J4  which  equals  $19,900;  sold 
100  at  100^  and  100  at  100,  which  equals  $20,- 
050.  The  difference  is  $150,  which  the  broker 
collects  by  draft  on  the  clearing  house.  Had 
he  not  included  the  100  shares  at  100  he  would 
have  owed  $8,850.  To  the  broker  who  delivers 
the  100  shares  to  him  at  100  he  gives  a  check 
for  $10,000. 

This  particular  part  of  the  operation  (the 
delivery  of  the  stock  and  collection  for  it),  is 
wholly  outside  of  the  clearing  house.  Deduct- 
ing from  this  $10,000  the  $150  received  in  the 
clearing  house  settlement,  his  net  payment  is 
$8,850,  exactly  what  it  would  have  been  had  he 
not  included  the  100  shares  at  100  in  the  clear- 
ing house  sheet. 

No  matter  if  the  broker  bought  more  stock 
than  he  sold,  or  sold  more  than  he  bought,  or 
what  the  prices  may  be  or  how  many  stocks 
may  be  included  in  his  sheet,  the  system  em- 
ployed in  clearing  his  sheet  accomplishes  its 
end.  Inasmuch  as  the  differences  both  in  cash 
and  stocks  are  provided  for  in  the  clearing 
house  sheet,  there  is,  when  the  general  settle- 
ment is  concluded,  no  balance  left  of  either 
cash  or  stock.  There  was,  of  course,  as  much 
of  each  stock  sold  as  was  bought,  because  there 
was  a  seller  as  well  as  a  buyer  at  the  same 


THE  INVESTOR'S  PRIMER  95 

price  in  each  individual  transaction,  and,  ac- 
cordingly, there  was  as  much  receivable  in  the 
aggregate  as  there  was  payable.  Both  sides 
of  every  account  are  bound  to  balance  or  equal- 
ize when  the  differences  in  the  stock  and 
money  are  figured  out  and  put  down  in  the 
proper  places. 

The  broker  who  is  short  of  stocks  in  his 
sheet  (who  sold  more  than  he  bought),  must 
borrow  the  stocks  that  he  is  short  of  for  the 
deliveries  which  he  is  directed  by  the  managei 
of  the  clearing  house  to  make. 

Not  all  stocks  that  are  dealt  in  on  the  New 
York  Stock  Exchange  are  cleared  through  the 
stock  exchange  clearing  house.  Only  those  on 
the  clearing  house  list  are  cleared.  The  stocks 
on  this  list  are  the  ones  actively  (largely) 
dealt  in.  If  an  inactive  stock  becomes  act've 
it  is  put  on  the  list;  if  an  active  stock  be- 
comes inactive  it  is  taken  off  the  list. 

Transactions  in  stocks  not  on  the  clearing 
house  list  are  not  reported  to  the  clearing 
house  at  all.  Settlements  in  these  stocks  are 
made  between  the  brokers  in  the  ordinary 
course  of  business.  For  another  thing,  only 
stocks  bought  and  sold  "regular  way"  (in  the 
regular  way)  and  at  seller  3  are  cleared. 

Stocks  bought  and  sold  "regular  way"  are 
put  on  the  clearing  house  sheet  on  the  day 


§ 

OF  THE 

UNIVERSITY 


96  THE  INVESTOR'S  PRIMER 

they  are  bought  and  sold,  but  are  deliverable 
on  the  following  day.  Stocks  bought  and  sold 
at  seller  or  buyer  3  are  not  delivered  until  the 
third  day  after  they  are  sold,  and  are  not  put 
on  the  clearing  house  sheet  until  the  second 
day  after  they  are  bought  and  sold;  they  are 
put  on  the  clearing  house  sheet  at  the  selling 
price  on  the  second  day. 

NON-ASSENTED   STOCK  OR  BONDS. 

Stock  or  bonds  which  the  owners  refuse  to  de- 
posit under  an  agreement  by  which  their 
status  will  be  changed.  For  additional  in- 
formation see  Readjustment. 

NON-CUMULATIVE  STOCK.  Stock  on 
which  dividends,  if  not  paid,  do  not  accumu- 
late— that  is,  if  dividends  are  not  paid  for  a 
period  they  have  not  subsequently  to  be  paid 
for  the  period  when  they  were  not  declared. 

NON-INTEREST-BEARING.  Bearing  or 
paying  no  interest.  The  money  issued  by  the 
United  States  government,  since  the  govern- 
ment pays  no  interest  on  it,  is  a  non-interest- 
bearing  obligation;  the  bonds  issued  by  the 
United  States  government,  since  the  govern- 
ment pays  interest  on  them,  are  interest-bear- 
ing obligations. 


THE  INVESTOR'S  PRIMER  97 

NOTE  BROKER.  One  who  effects  the  sale 
of  promissory  notes.  A  note  broker  is  differ- 
ent from  a  money  broker.  The  commission  of 
a  note  broker  is  generally  %  or  %  of  1%  of 
the  amount  of  the  note.  This  commission  is 
paid  by  the  one  for  whom  the  broker  sells  the 
paper.  The  buyer  pays  no  commission. 

ON  A  SCALE.  A  term  used  in  speculative 
operations  in  stocks,  meaning  buying  or  sell- 
ing, as  the  case  may  be,  at  stated  intervals,  in 
prices  as  prices  decline  or  advance.  For  in- 
stance, buying  at  100,  98,  96,  94  and  92  would 
be  buying  on  a  2%  declining  scale.  Reversing 
the  order  of  prices  would  be  buying  on  an 
ascending  scale.  The  operation  of  selling  on  a 
scale  is  conducted  in  the  same  fashion. 

ON  MARGIN.  When  stocks  are  bought  or 
are  sold  short  on  margin  a  percentage  of  the 
par  (face)  value,  say  10^,  is  deposited  with 
the  broker  to  secure  him  against  possible  loss. 
The  amount  deposited  is  margin. 

For  information  as  to  margin  or  speculative 
operations  in  stocks  bonds,  grain,  lard,  pork, 
short  ribs,  cotton,  coffee  and  silver  bullion 
see  margin. 

OPTION.  Property  bought  or  sold  to  be  re- 
ceived or  delivered  by  the  buyer  or  seller  in 


98  THE  INVESTOR'S  PRIMER 

accordance  with  the  terms  agreed  upon. 
Sometimes  the  buyer  pays  for  the  privilege  of 
calling  for  the  delivery  of  the  property  within 
a  certain  time  if  he  so  wills,  but  he  is  not 
obliged  to  take  it;  sometimes  the  seller  pays 
for  the  privilege  of  delivering  the  property. 

In  speculation  an  option  is  the  purchased 
privilege  of  either  receiving  or  delivering  a 
specific  amount  of  anything  (as  stocks,  grain, 
cotton,  coffee,  etc.)  at  a  specified  price  within 
a  specified  time. 

In  stocks  bought  on  the  buyer's  option  the 
buyer  may,  when  the  option  is  for  four  days  or 
more,  demand  delivery  of  the  stock  on  any  day 
within  the  time  specified  on  one  day's  notice  to 
the  seller.  In  stocks  sold  on  seller's  option, 
when  the  option  is  for  four  days  or  more,  the 
seller  may  deliver  the  stock  to  the  buyer  on 
any  day  within  the  time  specified  on  one  day's 
notice  to  the  buyer. 

When  a  dividend  becomes  due  on  a  stock 
during  the  pendency  of  an  option  on  it  the 
dividend  is  collected  by  the  seller  of  the  stock, 
who  holds  it,  allows  interest  on  it  and  pays  the 
dividend,  with  the  interest  on  it,  to  the  buyer 
on  the  settlement  of  the  contract.  When  an 
option  on  a  stock  matures  during  the  closing 
of  transfer  books,  the  seller  of  the  stock  gives 
to  the  buyer  of  the  stock  a  due  bill  for  the 


THE  INVESTOR'S  PRIMER  99 

amount  of  the  dividend  which  is  payable  when 
the  dividend  is  paid,  but  the  due  bill  does  not 
bear  interest. 

OPTIONAL  BOND.  A  bond  maturing 
(expiring)  at  a  specified  date,  but  which  may 
be  redeemed  (paid  and  cancelled)  after  a 
designated  date  at  the  pleasure  (option)  of  the 
company  (or  government)  issuing  it.  Thus,  a 
bond  maturing  in  fifty  years,  but  which  may 
be  redeemed  after  ten  years,  is  an  optional 
bond. 

ORDINARY  STOCK.  Common  or  general 
stock.  In  Great  Britain,  when  an  ordinary 
(common)  stock  has  been  divided  into  two 
parts,  one  part,  called  deferred,  receives  no 
dividend  until  the  other  part,  called  preferred, 
has  received  a  dividend  at  a  fixed  rate.  The 
deferred  stock  is  called  A  stock  and  the  pre- 
ferred stock  is  called  B  stock. 

This  B  or  preferred  stock  is  not  the  same  as 
preferred  stock  in  the  United  States.  What  in 
the  United  States  is  called  preferred  stock  is  in 
Great  Britain  called  preference  stock,  and 
preference  stock  in  Great  Britain  may  be  di- 
vided into  two  or  more  classes  called  first 
preference,  second  preference,  etc.,  just  as  pre- 
ferred stock  in  the  United  States  may  be  di- 


100  THE  INVESTOR'S   PRIMER 

vided  into  two  or  more  classes  called  first  pre- 
ferred, second  preferred,  etc.  When,  how- 
ever, there  is  but  one  class  of  preference  stock 
ahead  of  an  ordinary  stock  in  Great  Britain, 
the  B  or  preferred  stock  is  equivalent  to  sec- 
ond preferred  stock  in  the  United  States. 

OUTSIDE  BROKER.  A  broker  who  is  not 
a  member  of  an  exchange;  one  who  deals  in 
securities  that  are  not  dealt  in  on  a  stock 
exchange.  A  dealer  in  the  outside  market 
or  on  the  curb  is  an  outside  broker.  In  New 
York  such  a  broker  is  not  a  bucket  shop 
keeper;  see  Bucket  Shop.  In  London  an  out- 
side broker  is  one  who  is  not  a  member  of  the 
London  Stock  Exchange,  and  is  sometimes 
described  as  a  bucket  shop  keeper.  Many  Eng- 
lish outside  brokers,  however,  conduct  a  per- 
fectly legitimate  business. 

PAR.  The  face  value.  On  the  New  York 
Stock  Exchange  if  the  face  value  of  a  stock  is 
$100  it  is  at  par  when  it  is  selling  at  100.  It  is 
above  par  when  it  is  selling  at  a  higher  price, 
as  101 ;  it  is  below  par  when  it  is  selling  at  a 
lower  price,  as  99.  Half-stock  (stock  of  the 
face  value  of  $50)  also  is  at  par  when  it  is 
quoted  at  100  %  which  in  this  case  means  $50. 
The  face  value  of  a  stock  is  divided  into  100 


THE  INVESTOR'S  PRIMER  101 

parts  for  quotation  purposes,  no  matter  what 
the  face  value  may  be,  and  each  part  is  called 
1%  or  1  point.  Therefore,  when  a  half-stock 
is  quoted  at  101  it  is  one  point  above  par,  which 
means  that  the  stock  is  worth  $50.50  a  share; 
when  it  is  quoted  at  99  it  is  1  point  below 
par,  which  means  that  the  stock  is  worth  $49.50 
a  share.  The  same  principle  applies  to  quar- 
ter stock  (stock  of  the  face  value  of  $25)  and, 
in  brief,  to  stock  of  any  face  value. 

In  some  markets  stocks  are  quoted  in  dol- 
lars instead  of  by  percentage.  Thus,  in  such 
markets  if  a  stock  of  the  face  value  of  $100  is 
selling  at  100  it  is  at  par;  if  selling  at  101  it  is 
1  point  above  par;  if  selling  at  99  it  is  1  below 
par.  Likewise,  if  a  stock  of  the  face  value  of 
$50  is  selling  at  50  it  is  at  par;  if  selling  at  51 
it  is  1  above  par;  if  selling  at  49  it  is  1  below 
par.  So,  also,  if  a  stock  of  the  face  value  of 
$25  is  selling  at  25  it  is  at  par;  if  selling  at  26 
it  is  1  above  par;  if  selling  at  24  it  is  1  below 
par;  and  so  on. 

PAR  OF  EXCHANGE.  The  par  of  foreign 
exchange  is  the  fixed  intrinsic  value  of  the  cur- 
rency unit  (monetary  unit)  of  one  country  ex- 
pressed in  the  terms  of  the  currency  of  an- 
other country  which  uses  the  same  metal  as  a 
standard  of  Value.  Thus  in  United  States  gold 


102  THE  INVESTOR'S  PRIMER 

money  is  4.11  shillings,  or  4  shillings  1.31  pence 
in  English  gold  money,  or  5  francs  18.26  cen- 
times in  French  gold  money,  or  4  reichmarks 
(marks)  19.79  pfennig  in  German  gold  money, 
or  2  guilders  (florins)  48.78  cents  in  Nether- 
lands (Holland)  gold  money,  and  so  on. 

If  the  price  paid  for  a  bill  of  exchange  just 
equals  the  amount  for  which  it  is  drawn,  then 
exchange  is  at  par;  if  more  is  paid  exchange  is 
above  par ;  if  less  is  paid  exchange  is  below  par. 

Between  a  gold  standard  country  and  a 
silver  standard  country  there  can  exist  no  fixed 
par  of  exchange,  for  the  reason  that  silver,  un- 
like gold,  has  not  a  fixed  value ;  in  other  words, 
silver  being  merely  a  commodity,  its  value  de- 
pends on  the  state  of  the  market  for  it. 

PARTICIPATING  BOND.  Comparable 
to  an  income  bond,  inasmuch  as  the  return  to 
the  holder  in  interest  depends  on  the  extent  of 
the  revenues  so  applicable. 

The  first  bonds  to  bear  this  name  were  is- 
sued in  1902,  and  were  designated  "4  per  cent, 
and  participating  bonds."  These  bonds  were 
in  effect  collateral  as  well  as  income  bonds. 
The  company  which  issued  the  bonds  owned 
stock  in  another  company,  and  this  stock  was 
deposited  and  pledged  as  security  for  the  prin- 
cipal of  the  bonds.  Interest  at  4%  was  guar- 


THE  INVESTOR'S  PRIMER  103 

anteed  by  the  company  which  issued  the  bonds 
and  the  bonds  were  also  entitled  to  receive  in- 
terest in  excess  of  4%  as  permitted  by  the  divi- 
dends paid  on  the  stock  securing  the  bonds 
beyond  the  amount  necessary  first  to  provide 
for  the  4%  as  guaranteed. 

PASSENGER  DENSITY.  A  term  used  in 
railroad  accounting,  meaning  the  result  ob- 
tained when  the  total  number  of  miles  of  pas- 
sengers carried  is  divided  by  the  number  of 
miles  of  road  operated. 

PASSENGER  MILES.  A  railroad  term; 
the  number  of  miles,  collectively,  traveled  by 
all  passengers.  The  result  attained  by  adding 
together  the  number  of  miles  traveled  by  all 
passengers  shows  the  average  number  of  miles 
traveled  by  each  passenger.  Passenger  mile- 
age means  the  same  as  passenger  miles. 

PASSING  A  DIVIDEND.  Failure  to  de- 
clare a  dividend  that  had  previously  been  regu- 
larly paid.  When  the  directors  vote  not  to  pay 
a  dividend  that  previously  had  been  regularly 
declared  the  dividend  is  stopped;  when  the 
dividend  simply  is  not  declared  it  is  passed. 

PLAIN  BOND.  A  bond  not  secured  by 
mortgage  or  collateral  and  without  a  sinking 


104  THE  INVESTOR'S  PRIMER 

fund  provision.  A  debenture  bond  being  (as  a 
rule)  merely  a  promissory  note  in  the  form  of 
a  bond  is  a  plain  bond. 

POOL.  This  term  applies  when  interests 
join  together  for  mutual  advantage. 

The  anthracite  coal  pool,  as  it  formerly  ex- 
isted, was  an  agreement  whereby  each  com- 
pany belonging  to  the  pool  was  to  mine  a  cer- 
tain percentage  of  the  total  production.  The 
production  for  each  month  was  determined  in 
the  preceding  month.  The  purpose  of  the  pool 
was  regulation  of  both  output  and  prices.  By 
restricting  the  output  to  the  consumptive  de- 
mand, control  of  prices  was  accomplished.  A 
schedule  of  prices  was  prepared  for  each  month 
and  all  the  companies  made  sale  of  coal  in  ac- 
cordance with  it.  The  anthracite  coal  pool 
was  declared  illegal  by  the  courts  on  the 
ground  that  it  was  in  restraint  of  trade. 

PREFERENCE  STOCK.  This  is  the  Eng- 
lish designation  for  stock  that  is  preferred  over 
other  classes  as  to  dividends  and  assets.  It  is 
equivalent  to  what  in  the  United  States  is  called 
preferred  stock  when  there  is  only  one  class  of 
preferred  stock,  or  to  what  is  called  first  pre- 
ferred when  there  are  two  classes.  Preference 
stock  is  sometimes  divided  into  classes,  as  first 


THE  INVESTOR'S  PRIMER  105 

preference,  second  preference,  etc.,  with  the 
right  to  dividends  in  the  order  named. 

PREFERRED   ORDINARY   STOCK. 

English — also  called  B  stock — receives  a  divi- 
dend at  a  fixed  rate  before  any  payment  can 
be  made  on  the  deferred  ordinary  stock.  For 
additional  information  see  Preferred  Stock. 

PREFERRED  STOCK.  Stock  that  is  pre- 
ferred as  to  dividends  and  assets;  it  must  re- 
ceive a  dividend  before  a  dividend  can  be  paid 
on  the  common  stock,  and  in  a  distribution  of 
assets  it  participates  ahead  of  the  common 
stock.  Cumulative  preferred  stock  is  stock 
the  dividends  on  which,  if  not  paid  regularly 
or  in  full,  accumulates,  and  must  be  paid  in 
the  future  before  a  dividend  can  be  paid  on  the 
common  stock..  Preferred  stock  is  the  English 
designation  for  preferred  ordinary  (common) 
stock.  When  for  dividend  purposes  the  ordi- 
nary stock  of  a  company  has  been  divided  into 
two  parts  called  preferred  or  "B"  stock  and 
deferred  or  "A"  stock,  the  dividend  on  the  "A" 
stock  is  deferred  until  a  fixed  amount  has  been 
paid  on  the  "B"  stock. 

This  "B,"  or  preferred  stock,  is  not  the  same 
as  preferred  stock  in  the  United  States.  What 
in  the  United  States  is  called  preferred  stock 


106  THE  INVESTOR'S  PRIMER 

is  in  Great  Britain  called  preference  stock,  and 
preference  stock  in  Great  Britain  may  be  di- 
vided into  two  or  more  classes  called  first  pref- 
erence, second  preference,  etc.,  just  as  pre- 
ferred stock  in  the  United  States  may  be  di- 
vided into  two  or  more  classes  called  first  pre- 
ferred, second  preferred,  etc.  When,  however, 
there  is  but  one  class  of  preference  stock  ahead 
of  an  ordinary  stock  in  Great  Britain,  the  "B," 
or  preferred  stock,  is  equivalent  to  second  pre- 
ferred stock  in  the  United  States. 

Preference  stock  is  sometimes  divided  into 
classes,  as  first  preference,  second  preference, 
etc.,  with  the  right  to  dividends  in  the  order 
named. 

PREMIUM.  The  amount  named  in  excess 
of  the  par  (face)  value.  When  a  stock,  for  in- 
stance, is  selling  at  a  premium,  the  premium 
is  the  amount  it  brings  beyond  its  par  or  face 
value.  When  a  stock  is  lending  at  a  premium 
(see  Borrowing  and  Lending  Stocks),  the  pre- 
mium is  the  amount  paid  by  the  borrower  of 
the  stock  to  the  lender  of  it  for  the  use  of  it. 
The  purpose,  usually,  for  which  a  stock  is  bor- 
rowed is  to  enable  the  borrower,  who  has  sold 
it  short  (sold  stock  he  did  not  possess),  to 
make  delivery  to  the  purchaser. 

In  Great  Britain  when  a  stock  or  other  se- 


THE  INVESTOR'S   PRIMER  107 

curity  is  at  a  premium  the  premium  is  reck- 
oned at  so  much  in  the  pound  on  shares  and  at 
a  percentage  on  stock  or  'bonds. 

In  insurance  in  Great  Britain  the  premium  is 
the  consideration  paid  by  the  policy  holder  for 
insurance.  Thus,  a  premium  of  20  shillings 
per  cent,  means  that  20  shillings  is  the  premium 
on  each  £100  insured. 


PRINCIPAL.  The  capital  sum  upon  which 
interest  is  payable ;  also,  the  one  who  employs 
a  broker  or  other  agent. 

A  principal  is  responsible  for  the  act  of  an 
agent,  but  an  agent  who  exceeds  his  authority 
renders  himself  personally  liable. 

A  person  who  has  given  money  to  his  own 
agent  to  be  delivered  to  his  creditor  cannot  set 
up  the  claim  that  he  has  paid  his  creditor  un- 
less the  money  actually  reaches  the  creditor. 
In  other  words,  while  the  money  is  in  the  con- 
trol of  the  agent  of  the  debtor  it  is  at  the  debt- 
or's risk,  and  it  cannot  be  charged  against  the 
creditor  any  more  than  if  it  remained  in  the 
debtor's  own  hands. 

PRIVILEGE.  A  general  name  for  a  call, 
put,  spread  or  straddle,  information  as  to  each 
of  which  is  furnished  under  its  own  title. 


108  THE  INVESTOR'S  PRIMER 

There  can  be  no  loss  to  the  buyer  of  a  privi- 
lege beyond  the  amount  paid  for  it.  Privileges 
are  legal  and  are  enforceable  as  contracts,  but 
they  are  not  recognized  by  the  New  York 
Stock  Exchange. 

Privileges  are  often  bought  as  a  protection 
against  loss  on  transactions  in  the  stock 
market.  Illustration:  One  hundred  shares  of 
stock  are  bought  at  100.  A  put  under  which 
the  stock  can  be  delivered  at  98  is  purchased 
for  1%,  which  makes  the  net  price  of  the  put 
97.  Then,  if  the  stock  goes  down  to  say  94, 
the  stock  owned  by  the  holder  of  the  put  can 
be  put  (delivered)  to  the  issuer  of  the  put  at 
98  so  that  the  net  loss  is  only  Z%  instead  of 
6%,  as  would  be  the  case  if  no  put  had  been 
bought  and  the  stock  had  to  be  sold  at  94.  On 
the  other  hand,  should  the  stock  go  up  to  say 
106,  only  the  cost  of  the  put  would  have  to  be 
deducted  from  the  profit  on  the  stock. 

In  the  case  of  a  stock  sold  short  a  call  would 
be  employed  for  protection  against  loss.  JE£ 
the  stock  were  sold  short  at  100  and  if  a  call  at 
102  were  purchased  for  \%  and  the  stock  ad- 
vanced to  106,  the  net  loss  would  be  only  3%', 
as  against  6%  if  no  call  had  been  purchased 
and  the  stock  had  to  be  covered  (bought  back) 
at  106.  If  the  stock  against  which  the  put  was 
bought  went  down  to  94,  only  a  deduction  of 


THE  INVESTOR'S  PRIMER  109 

1%,  the  cost  of  the  put,  would  have  to  be  made 
from  the  profit  on  the  stock. 

Calls  and  puts  on  grain  are  based  on  the 
same  general  principle  as  those  on  stocks,  but 
they  are  not  employed  to  any  extent  except  to 
limit  loss.  In  some  states  puts  and  calls  on 
grain  are  illegal. 

PROXY.  A  person  who  is  empowered  to 
represent  another  in  a  given  matter ;  the  name 
is  also  given  to  the  instrument  by  which  a  per- 
son is  empowered  so  to  act. 

A  person  who  votes  by  proxy  on  stock  be- 
longing to  another  is  said  to  hold  a  proxy  on 
the  stock. 

PUT.  A  put  (on  a  stock)  is  a  contract  or 
written  agreement  binding  the  issuer  to  receive 
from  the  holder,  stock  named  in  the  agreement 
within  a  certain  time  at  a  certain  price  if  the 
holder  shall  so  demand,  or  in  other  words, 
shall  elect  to  deliver  (put)  the  stock.  For  ex- 
ample, A  signs  a  promise  to  receive  100  shares 
of  some  specified  stock  from  B  at  100  at  any 
time  within  60  days  if  B  so  demands.  A  sells 
this  promise  to  B  for,  say  $100.  If,  within  the 
60  days,  the  stock  falls  in  price  so  that  B  can 
buy  it  at  a  profit,  B  buys  it  at  the  lower  price 
and  calls  on  A  to  receive  the  stock.  The  stock 


110  THE  INVESTOR'S  PRIMER 

must  go  below  99  before  there  is  a  profit  for 
B.  If  the  stock  advances  or  does  not  fall  be- 
low 99,  B,  of  course,  does  not  deliver  (put)  it 
and  A  makes  $100  on  his  risk.  In  delivering 
the  stock  B  must  give  one  day's  notice,  except 
on  the  last  day,  when  no  notice  is  required. 

If  a  dividend  becomes  due  on  a  stock  during 
the  pendency  of  a  put  on  it  the  dividend  goes 
to  the  seller  of  the  put  if  the  stock  is  put  (de- 
livered) to  him.  A  dividend  always  goes  with 
the  stock. 

A  put  on  grain  or  any  other  speculative  com- 
modity is  based  on  the  same  general  principle 
as  in  the  ease  of  stocks. 

PYRAMIDING.  A  system  of  enlarging 
operations  by  use  of  paper  profits  (profits  in 
transactions  not  yet  closed  and  consequently 
not  yet  in  hand). 

Illustration :  One  hundred  shares  of  stock  of 
the  par  value  of  100  is  bought  at  10  on  a  mar- 
gin of  5%.  The  stock  advances  to  15.  There 
is  a  profit  of  5%  which  can  be  used  as  margin 
in  the  purchase  of  100  shares  more.  The  price 
goes  up  to  20.  There  is  then  a  profit  of  5%  on 
the  second  lot  and  an  additional  profit  of  5%* 
on  the  first  lot,  so  that  there  is  an  unencum- 
bered profit  of  10%  on  100  shares  or  5^>  on 
200  shares.  The  profit  is  utilized  as  margin  for 


THE  INVESTOR'S  PRIMER  111 

the  purchase  of  200  shares  more.  The  price 
goes  up  to  25.  Then  there  is  an  unencum- 
bered profit  of  5%  on  the  whole  400  shares  or 
20%  on  100  shares.  This  profit  is  used  to  buy 
400  shares  more. 

Then,  perhaps,  the  price  drops  to  20.  There 
being  only  5%  margin  on  the  whole  800  shares 
the  whole  accumulated  profit  of  $3,500  disap- 
pears, as  well  as  the  margin  of  5%  provided 
for  the  purchase  of  the  first  100  shares.  Should 
the  price  go  on  up  to  30,  however,  the  profits 
would  be  increased  by  $4,000,  which  would 
provide  5%  margin  for  800  shares  more  of 
stock,  making  the  total  amount  of  stock  held 
1,600  shares,  1,500  of  which  would  have  been 
purchased  with  profits. 

Selling  stock  at  intervals  on  a  decline,  using 
profits  for  margin,  is  pyramiding,  as  well  as 
buying  it  on  profits  on  an  advance. 

RAILROAD  EARNINGS.  In  compiling 
railroad  reports  the  total  earnings  or  receipts 
from  traffic  are  set  down  as  gross  earnings  and 
the  remainder,  after  deducting  operating  ex- 
penses (cost  of  handling  traffic),  is  net  earn- 
ings. To  net  earnings  is  added  other  income 
(usually  derived  from  investments,  which  are 
often  in  the  form  of  securities  held  to  control 
other  roads)  and  the  total  is  gross  income  (as 


112  THE  INVESTOR'S  PRIMER 

distinguished  from  gross  earnings).  From 
gross  income  are  paid  rentals  and  other 
charges,  interest  requirements  (commonly 
called  fixed  charges),  etc.  The  remainder  is 
designated  as  net  income.  From  it  are  paid 
dividends  and  what  is  left  is  surplus. 

In  reporting  gross  earnings  it  is  the  practice 
to  divide  each  month  into  four  weeks.  The 
first  seven  days  are  counted  as  the  first  week, 
the  second  seven  days  as  the  second  week  and 
the  third  seven  days  as  the  third  week,  while 
the  remaining  days  of  the  month  are  counted 
as  the  fourth  week.  In  a  month  of  30  days  the 
fourth  week  consists  of  nine  days,  and  in  a 
month  of  31  days  it  consists  of  ten  days.  Thus, 
the  fourth  week  may  contain  two  Sundays. 

The  custom  is  to  compare  railroad  earnings 
in  a  given  period  with  those  in  the  correspond- 
ing period  in  the  year  before.  Railroad  traffic 
is  light  on  Sunday,  so  that  when  a  fourth  week 
containing  two  Sundays  is  compared  with  a 
fourth  week  containing  only  one  Sunday,  or 
vice  versa,  allowance  must  be  made  for  the 
difference  in  the  number  of  working  days 
(week  days).  Likewise,  in  a  monthly  report 
of  earnings  a  month  may  contain  five  Sun- 
days, whereas  the  same  month  in  the  pre- 
ceding year  may  have  contained  only  four  Sun- 
days, or  the  reverse. 


THE  INVESTOR'S  PRIMER  113 

A  railroad  as  a  rule  makes  a  weekly  report 
of  gross  earnings;  it  makes  a  monthly  report 
of  gross  and  net  earnings,  with  deductions  for 
charges  of  all  kinds,  so  that  a  monthly  report 
takes  account  of  everything  in  the  month  in 
question;  and  finally,  the  road  makes  a  yearly 
(annual)  report  which  is  a  consolidation  of  the 
twelve  monthly  reports  with  details  added,  and 
with  remarks  by  the  president  and  other  of- 
ficials. 

READJUSTMENT.  Sometimes  called 
simple  adjustment ;  a  readjustment  is  when  the 
financial  reconstruction  or  rehabilitation  of  a 
railroad  or  other  corporation  is  voluntary — 
that  is,  by  concurrence  of  the  security  holders. 
Reorganization,  as  distinguished  from  read- 
justment, is  when  the  financial  reconstruction 
is  compulsory — that  is,  when  it  is  effected  by 
a  receivership  and  foreclosure. 

In  a  readjustment  (a  financial  reconstruction 
that  is  voluntary)  bondholders  may  exchange 
their  bonds  for  new  bonds  bearing  a  lower 
rate  of  interest  than  the  old  ones,  but  in  such  a 
case  the  loss  in  interest  is  compensated  for  by 
the  delivery  to  the  holders  of  the  bonds  who 
make  the  exchange  of  a  bonus  in  (a  gift  of) 
stock  or  in  some  other  security,  such  as  in- 
come bonds  (income  bonds  receive  interest 


114  THE  INVESTOR'S  PRIMER 

only  if  earned).  Or,  the  bondholders  may  ex- 
change their  bonds  for  a  smaller  amount  of 
new  bonds,  receiving  stock  or  income  bonds 
as  compensation  for  the  surrender  of  a  portion 
of  tlieir  holdings. 

Again,  cumulative  stock  may  be  exchanged 
for  a  larger  amount  of  non-cumulative  stock. 
Or,  the  exchange  may  be  on  even  terms,  with 
compensation  for  the  surrender  of  the  cumu- 
lative right  on  the  stock. 

The  compensation  usually  takes  the  form  of 
a  bonus  of  some  kind  as,  for  instance,  income 
bonds. 

Financial  readjustments  without  foreclosure 
to  enforce  them  are  not  numerous. 

Bonds  and  stocks,  the  holders  of  which 
agree  to  accept  the  terms  of  a  readjustment 
plan,  are  termed  assenting  bonds  and  stock; 
bonds  and  stock  the  holders  of  which  do  not 
accept  the  terms  of  a  readjustment  plan  are 
termed  non-^assenting  or  unassenting  bonds 
and  stock. 

REGISTERED  BOND.  A  registered  bond 
is  one  registered  in  the  name  of  the  owner,  and 
the  bond  itself  bears  his  name.  Such  a  bond 
is  transferable  the  same  as  a  stock  certificate. 
The  bond  itself  contains  a  form  for  assignment 
and  transfer.  When  a  registered  bond  is  trans- 


THE  INVESTOR'S  PRIMER  115 

ferred  a  new  bond  is  issued  for  the  old  one  just 
as  when  a  stock  certificate  is  transferred  a  new 
certificate  is  issued  for  the  old  one. 

The  interest  on  a  registered  bond  is  paid  by 
check,  which  is  sent  by  mail  to  the  postoffice 
address  of  the  owner  of  the  bond.  Due  notice 
of  change  of  address  should,  therefore,  be 
given.  The  old  address  should  be  given  as 
well  as  the  new  one. 

There  are  some  registered  coupon  bonds,  but 
such  issues  are  not  numerous. 

REGISTERED  COUPON  BOND.  A  bond 
the  principal  of  which  is  payable  only  to  the 
one  whose  name  is  inscribed  on  it,  ?.nd  in  whose 
name  also  the  bond  is  registered  (entered  on 
the  books  of  the  company  issuing  it),  while  the 
coupons  calling  for  the  payment  of  the  interest 
as  it  becomes  due,  are  payable  to  the  bearer. 

REHYPOTHECATION.  The  hypotheca- 
tion again  of  collateral  already  hypothecated. 
Rehypothecation,  except  by  consent  of  the 
owner  of  the  collateral,  is  illegal. 

RELEASED  INDORSED,  BOND.  Any 
indorsement  on  a  coupon  bond  stating  that  it 
has  been  deposited  as  security  for  bank  circu- 
lation (bank  notes)  or  for  insurance  require- 


116  THE  INVESTOR'S  PRIMER 

ment  may  be  released  by  an  acknowledgment 
of  the  release  before  a  notary  public;  it  will 
then  be  a  delivery  in  accordance  with  New 
York  Stock  Exchange  rules  as  a  released  in- 
dorsed bond. 

REORGANIZATION.  When  the  financial 
reconstruction  or  rehabilitation  of  a  railroad  or 
other  corporation  is  voluntary — that  is,  by 
concurrence  of  the  security-holders — the  term 
readjustment  applies.  When  the  financial  re- 
construction is  compulsory — that  is,  when  it 
is  effected  by  a  receivership  and  foreclosure — 
the  term  reorganization  applies.  Most  recon- 
structions are  compulsory ;  they  seldom  can  be 
effected  except  by  legal  process  following  in- 
solvency. 

The  method  of  reorganization  is  ordinarily 
as  follows :  Alter  default  has  been  made  in  in- 
terest on  bonds,  say  the  first  mortgage  bonds, 
a  receiver  is  appointed,  after  which  a  plan 
of  reorganization  is  formulated.  Provision 
usually  is  made  in  the  plan  whereby  the  first 
mortgage  bonds,  together  with  the  accumu- 
lated unpaid  interest,  are  to  be  paid  in  full. 
Such  holders  as  may  desire  to  do  so  take  for 
their  bonds,  bonds  of  a  newly  formed  com- 
pany, with  perhaps  stock  for  the  unpaid  in- 
terest. Such  holders  as  prefer  cash  for  their 


THE  INVESTOR'S  PRIMER  117 

bonds  and  unpaid  interest  are  paid  in  cash. 
It  sometimes  is  the  case  that  the  holders  of 
bonds  who  take  bonds  of  the  new  company  for 
their  old  bonds  receive  the  unpaid  interest  in 
cash. 

The  money  to  pay  those  bondholders  who 
prefer  cash  (and  to  pay  unpaid  interest  if  it  is 
to  be  paid  in  cash)  and  to  provide  other  needed 
funds  and  working  capital,  is  raised  by  levying 
an  assessment  on  the  stock  (on  the  holders  of 
the  stock  at  so  much  per  share).  Then  an 
order  for  sale  of  the  property  under  fore- 
closure is  obtained  from  the  court  (the  prop- 
erty being  under  the  control  of  the  court  after 
the  appointment  by  it  of  a  receiver). 

The  sale  wipes  out  the  bonds  and  the  stock. 
The  proceeds  of  the  sale,  however,  must  go  to- 
ward the  liquidation  of  the  mortgage  debt. 
The  property  (generally)  is  bid  in  by  a  com- 
mittee of  the  bondholders  for  the  benefit  of  the 
bondholders.  The  reorganization  plan  (gen- 
erally) is  primarily  in  the  interest  of  the  bond- 
holders and  only  secondarily  in  the  interest  of 
the  stockholders. 

REPUDIATION.  The  rejection,  in  whole 
or  in  part,  of  a  contract,  debt  or  obligation. 
The  term  applies  in  particular  to  the  rejection 


118  THE  INVESTOR'S  PRIMER 

or  mandatory  scaling  of  its  debt  by  a  govern- 
ment. 

The  repudiation,  as  applied  to  the  rejection 
of  a  debt  by  a  state,  was  first  used  in  1841 
when  the  state  of  Mississippi  repudiated  bonds 
issued  to  railroad  companies  which  failed  to 
comply  with  conditions  on  which  they  received 
them. 

RUPEE  PAPER.  Securities  of  the  govern- 
ment of  India,  interest  and  principal  being  pay- 
able in  rupees  in  India  and  by  bills  of  ex- 
change on  Calcutta  in  England. 

SCRIP.  Usually  the  term  is  applied  to  a 
certificate  for  a  fraction  of  a  share  of  stock  and 
usually,  also,  scrip  is  convertible  into  shares 
when  presented  in  amounts  equal  to  the  face 
value  of  a  full  share. 

It  has  no  voting  power  or  dividend  rights 
until  converted  into  full  shares  of  stock,  al- 
though sometimes  interest  is  paid  on  it. 

Scrip  was  also  the  name  given  to  United 
States  paper  currency  of  denomination  less 
than  $1,  which  is  no  longer  issued ;  such  money 
was  commonly  called  "shin  plasters." 

In  Great  Britain  it  is  the  practice  to  issue 
scrip  to  represent  instalments  paid  on  sub- 
scriptions for  stock;  when  all  instalments  are 


THE  INVESTOR'S  PRIMER  119 

paid  the  scrip  is  exchanged  for  stock  certifi- 
cates. 

SCRIP  DIVIDEND.  One  payable  in  scrip, 
or  in  other  words,  a  due  bill,  sometimes  bear- 
ing interest  at  the  legal  rate  and  usually  con- 
vertible into  stock,  but  having  no  voting  power 
and  entitled  to  no  dividend  until  so  converted. 

SECOND  MORTGAGE.  The  mortgage 
that  is  a  lien  after  the  first  mortgage. 

SECURITIES  COMPANY.  Same  as 
holding  company;  a  company  which  owns  the 
securities  of  other  companies  and  depends  for 
its  income  upon  the  interest  and  dividends 
yielded  by  these  securities.  It  usually  issues 
bonds  as  well  as  stock  itself.  Its  bonds  are 
collateral  trust  bonds,  being  secured  by  bonds 
or  stocks  of  other  companies  owned  by  it.  A 
securities  company  is  not  necessarily  a  con- 
trolling company — it  is  not  necessary  that  it 
should  possess  a  majority  of  the  stocks  of  the 
companies  whose  securities  are  included  in  its 
assets. 

SELLER'S  OPTION.  A  seller's  option  is, 
in  effect,  a  put.  In  stocks  sold  on  seller's  op- 
tion the  seller  may,  when  the  option  is  for  more 


120  THE  INVESTOR'S  PRIMER 

than  three  days,  put  (deliver)  the  stock  on  any 
day  within  the  specified  time  on  one  day's 
notice  to  the  buyer.  In  a  contract  for  four  or 
more  days  the  buyer,  unless  the  contract  is  flat 
(without  interest),  pays  to  the  seller  interest 
at  the  legal  rate  on  the  price  of  the  stock  up 
to  the  day  of  delivery.  The  amount  of  a  divi- 
dend becoming  due  during  the  pendency  of  a 
contract  is  payable  by  the  seller  to  the  buyer. 
No  contract  on  seller's  (or  buyer's)  option 
for  less  than  4  days  or  which  extends  beyond 
60  days  can  be  entered  into  on  the  New  York 
Stock  Exchange. 

SELLING  SHORT.  In  Wall  Street  this 
consists  in  selling  stocks  not  owned,  and  bor- 
rowing them  for  immediate  delivery.  When 
finally  bought  in  (covered)  the  borrowed 
stocks  are  returned.  If,  in  the  interval  between 
selling  and  buying,  the  stocks  have  declined, 
the  trade  is  profitable;  if  there  has  been  an 
advance  it  is  unprofitable.  See  Short. 

SETTLEMENT,  The.  The  fortnightly  set- 
tlement on  the  London  Stock  Exchange,  which 
formerly  lasted  for  three  consecutive  days,  now 
takes  four  days,  as  the  "carry-over"  in  mining 
shares  begins  the  day  before  the  ordinary 
"carry-over."  According  to  the  London  cus- 


THE  INVESTOR'S  PRIMER  121 

torn,  payments  and  deliveries  in  stock  tran- 
sactions are  made  only  twice  a  month  instead 
of  every  day  as  is  the  case  in  New  York. 

SHORT.  One  who  has  sold  a  stock  which 
he  does  not  possess  and  has  borrowed  the 
stock  for  delivery  to  the  buyer,  is  short  of  that 
stock.  One  who  is  short  of  several  stocks  is 
said  to  be  short  of  the  market.  One  who  is 
short  is  a  bear. 

The  object  of  selling  short  is,  of  course,  to 
repurchase  subsequently  at  a  lower  figure. 
The  rules  of  the  New  York  Stock  Exchange 
enforce  the  completion  of  each  transaction  en- 
tered into  "regular  way"  on  the  day  following 
the  transaction.  Hence,  the  speculator  who 
has  sold  short  is  forced  to  borrow  the  stock 
he  has  sold,  but  does  not  own  and  make  actual 
delivery  of  it  next  day  to  the  purchaser.  This 
he  accomplishes  through  his  broker  by  paying 
the  market  value  of  the  stock  to  the  one  from 
whom  he  borrowed  it  and  then  returning  the 
borrowed  stock  to  the  lender  when  he  has  cov- 
ered, or  in  other  words,  bought  back  the  stock. 

When  a  speculator  is  short  of  stock  (has 
sold  stock  which  he  did  not  own)  on  which  a 
dividend  becomes  due,  he  has  to  pay  the 
amount  of  the  dividend  to  the  person  from 


122  THE  INVESTOR'S  PRIMER 

whom  he  borrowed  the  stock,  to  make  delivery 
to  the  one  to  Whom  he  sold  the  stock. 

In  speculation  in  grain,  cotton,  coffee  and 
other  commodities,  contracts  to  receive  and 
deliver  the  property  are  entered  into  the  same 
as  in  stocks. 

SINKING  FUND.  A  fund  to  which  are 
contributed  amounts  of  money  at  specified 
times  for  the  redemption  of  a  debt.  For  in- 
stance, when  a  sinking  fund  is  established  for 
the  redemption  of  an  issue  of  bonds  a  certain 
amount  of  money  is  added  to  the  fund  each 
year  (or  at  other  stated  intervals)  until  finally 
the  fund  amounts  to  enough  to  redeem  (pay 
off)  the  bonds. 

Sometimes  the  money  paid  into  a  sinking 
fund  is  invested  in  other  bonds  (or  other  se- 
curities), the  interest  payments  (or  dividends) 
received  from  which  help  to  swell  the  sinking 
fund.  It  is  not  infrequently  the  case  that  a 
sinking  fund  is  established  to  redeem  drawn 
bonds. 

SINKING  FUND  BOND.  A  bond,  pro- 
vision of  the  payment  of  the  principal  of  which, 
is  made  by  the  creation  of  a  sinking  fund.  See 
Sinking  Fund. 


THE  INVESTOR'S  PRIMER  123 

SPECIAL  AID  BOND.  One  of  an  issue  in 
aid  of  some  enterprise,  as  a  railroad  or  manu- 
facturing concern,  which  is  expected  to  benefit 
the  nation,  state  or  municipality  which  issues 
the  bonds. 

SPECIAL  ASSESSMENT  BOND.  One 
of  an  issue  of  municipal  bonds  payable,  princi- 
pal and  interest,  from  special  taxes  levied  upon 
particular  property,  for  an  improvement  from 
which  this  property  derives  special  benefit. 

SPREAD.  A  spread  is  like  a  straddle,  a 
double  privilege,  a  put  and  a  call  combined. 
If  the  stock  goes  below  the  price  named  in  the 
put  end  (or  part),  plus  the  cost  of  the  spread, 
the  holder  of  the  spread  profits ;  so,  also  if  the 
stock  goes  above  the  price  named  in  the  call 
end  (or  part),  plus  the  cost  of  the  call,  the 
holder  of  the  call  profits. 

Illustration:  A  spread  on  100  shares  may  be 
bought  on  which  the  stock  may  be  called 
(called  for)  atJ02^,  or  put  (delivered)  at 
97^.  Say,  2y2%  ($250)  is  paid  for  the  spread. 
Then  the  stock  must  go  above  105  or  below  95 
before  there  is  a  profit  in  the  spread. 

If  a  dividend  becomes  due  on  a  stock  during 
the  pendency  of  a  spread  on  it  the  dividend 
goes  to  the  holder  of  the  spread  if  he  elects  to 


124  THE  INVESTOR'S  PRIMER 

receive  and  pay  for  the  stock,  but  it  goes  to  the 
seller  of  the  spread  if  the  stock  is  put  (de- 
livered) to  him.  A  dividend  always  goes  with 
the  stock. 

STOCK  POWER.  The  name  given  to  the 
irrevocable  power  of  attorney  used  in  assign- 
ing or  transferring  title  to  a  certificate  of  stock. 

STOP  ORDER.  When  an  order  is  given 
to  a  broker  for  the  purchase  of  a  stock,  for  in- 
stance, at  100  with  instructions  to  "stop  it"  at 
98,  it  means  that  the  stock  is  to  be  sold  if  it 
declines  to  98.  On  the  other  hand,  if  a  stock 
is  sold  short  at  100  with  instructions  to  "stop 
it"  at  102,  it  is  to  be  bought  back  if  it  advances 
to  102.  A  stop  order  is  employed  principally 
to  limit  loss  in  speculation ;  in  such  a  case  it  is 
specifically  designated  as  a  stop-loss  order. 

STRADDLE.  A  straddle  is  like  a  spread, 
a  double  privilege,  a  put  and  a  call  combined, 
but  only  one  price  is  named  in  it.  The  stock 
may  be  called  (called  for)  or  put  (delivered) 
at  this  price.  The  stock  must  go  up  or  down 
more  than  the  amount  paid  for  the  straddle  be- 
fore there  is  a  profit  in  it.  Illustration :  A  stock 
is  selling  at  100  and  a  straddle  on  100  shares  is 
bought  at  this  price,  for  which  5%  ($500)  is 


THE  INVESTOR'S  PRIMER  125 

paid.  The  stock,  therefore,  must  go  above  105 
or  below  95  before  there  is  a  profit  to  the  pur- 
chaser of  a  straddle. 

If  a  dividend  becomes  due  on  a  stock  during 
the  pendency  of  a  straddle  on  it,  the  dividend 
goes  to  the  holder  of  the  straddle  if  he  elects 
to  receive  and  pay  for  the  stock,  but  it  goes  to 
the  seller  of  the  straddle  if  the  stock  is  put  (de- 
livered) to  him. 

SYNDICATE.  As  a  financial  term  syndi- 
cate means  several  bankers  or  capitalists  who 
join  together  to  carry  out  or  to  insure  the 
carrying  out  of  some  plan  or  scheme  which  in- 
volves a  large  amount  of  money. 

The  commonest  form  of  syndicate  is  an 
underwriting  syndicate.  For  instance,  the 
capital  stock  of  a  company  (or  a  certain 
amount  of  it)  is  to  be  offered  for  public  sub- 
scription at,  say,  100  (par).  An  underwriting 
syndicate  is  organized  and  it  underwrites  the 
entire  issue  at  90.  It,  in  effect,  buys  the  whole 
issue  at  90.  The  stock  taken  (subscribed  for) 
by  the  public  practically  is  sold  for  account  of 
the  syndicate,  for  it  receives  the  difference  of 
10%  between  the  price  at  which  the  stock  is 
sold  to  the  public  (100)  and  the  price  at  which 
it  is  underwritten  by  the  underwriting  syndi- 
cate (90).  The  syndicate  is  obliged  to  take 


126  THE  INVESTOR'S   PRIMER 

the  stock  not  sold  to  (subscribed  for  by)  the 
public,  but  it  has  to  pay  only  90  for  it  as 
against  100  which  the  public  has  to  pay.  If 
all  the  stock  is  taken  by  the  public  (as  is  often 
the  case)  the  underwriting  syndicate  has  not 
to  take  and  pay  for  any  stock,  but  simply  re- 
ceives and  divides  among  its  members  (in  pro- 
portion to  their  shares  in  the  syndicate)  the 
amount  represented  by  the  difference  of  10% 
between  the  price  of  the  stock  to  the  public 
and  the  price  to  the  underwriting  syndicate. 
If  some  of  the  stock  is  not  taken  by  the  public 
it  may  be  apportioned  among  the  members  of 
the  syndicate,  but  usually  it  is  sold  (in  the 
open  market  or  otherwise)  for  the  syndicate. 

TIME  LOAN.  Wall  Street  designation  for 
money  borrowed  for  a  specified  period,  usually 
not  less  than  30  days  nor  more  than  six 
months,  the  repayment  of  which  is  secured  by 
the  deposit  of  collateral  (stocks  and  bonds) 
with  the  lender. 

TON  MILE  COST.  A  railroad  term,  mean- 
ing the  average  cost  per  mile  of  carrying  each 
ton  of  freight. 

TON  MILES.  A  railroad  term;  the  whole 
number  of  miles  the  whole  number  of  tons  was 


THE  INVESTOR'S  PRIMER  127 

hauled.  The  result  attained  by  adding  together 
the  number  of  miles  each  ton  was  hauled  and 
then  dividing  by  the  number  of  tons  shows  the 
average  number  of  miles  each  ton  was  hauled 
(transported).  Ton  mileage  means  the  same 
as  ton  miles. 

TRAIN  MILES.  A  railroad  term ;  the  num- 
ber of  miles  traversed  by  a  particular  trail*; 
or,  the  number  of  miles  collectively  traversed 
by  all  trains  of  a  railroad.  The  result  attained 
by  adding  together  the  number  of  miles  trav- 
ersed by  all  trains  on  a  railroad  and  dividing 
by  the  number  of  trains  shows  the  average 
number  of  miles  traversed  by  each  train. 
Train  mileage  means  the  same  as  train  miles. 

TRANSFER.  The  act  of  placing  a  certifi- 
cate of  stock  or  a  registered  bond  in  the  nam<? 
of  a  new  owner.  The  new  owner  of  a  stock 
which  is  in  receipt  of  dividends  or  of  a  regis- 
tered bond  upon  which  interest  is  paid,  should 
have  it  transferred  into  his  name  before  the 
closing  of  the  books  for  a  dividend  or  for  in- 
terest for  the  check  for  the  dividend,  or  in- 
terest will  be  sent  to  the  person  in  whose  name 
the  stock  or  bond  stands. 

TRUSTEE  STOCK.   A  stock  of  the  highest 


128  THE  INVESTOR'S  PRIMER 

class  in  which  trustees  are  authorized  by  law  to 
invest. 

TWO  DOLLAR  BROKER.  A  member  of 
the  New  York  Stock  Exchange  who  executes 
orders  for  other  members  for  $2  per  hundred 
shares,  and  whose  participation  in  transactions 
ends  with  the  simple  act  of  buying  or  selling. 

UNASSENTED     STOCK     OR     BONDS. 

Stock  or  bonds  which  the  owners  refuse  to 
deposit  under  an  agreement  by  which  their 
status  will  be  changed.  For  additional  infor- 
mation see  Readjustment. 

UNDERLYING  MORTGAGE.  A  mort- 
gage anterior  and  prior  in  claim  to  another 
mortgage,  as,  for  instance,  when  speaking  of 
a  second  mortgage  the  first  mortgage  is  the 
underlying  mortgage. 

UNDERWRITER.  One  who  insures;  a 
member  of  an  underwriting  syndicate.  For  ad- 
ditional information  see  Syndicate. 

UNIFIED  BONDS.  Another  name  for  con- 
solidated bonds  or  consols;  an  issue  of  bonds 
created  to  unify  or  consolidate  or  refund  (take 
up  and  replace)  two  or  more  previous  issues. 


THE  INVESTOR'S  PRIMER  129 

UNLISTED  STOCKS.  This  is  the  com- 
mon designation  for  stocks  which,  in  official 
terms,  have  been  "admitted  to  quotation"  in  the 
"unlisted  department"  of  the  New  York  Stock 
Exchange.  Admitted  to  quotation  means  ad- 
mitted to  dealings. 

VALUE  BILL  (of  exchange).  A  draft  (bill 
of  exchange)  drawn  against  a  consignment  of 
property.  For  instance,  if  A  in  New  York 
ships  goods  to  B  in  London  and  draws  on  B  for 
the  value  of  the  goods,  attaching  the  bill  of 
lading,  insurance  policy,  etc.,  to  the  draft  (bill 
of  exchange),  the  bill  is  a  value  bill. 

Again,  if  a  banker  in  New  York  sells  securi- 
ties to  a  banker  in  London  and  draws  on  the 
bank  in  London  for  the  value  of  the  securities, 
attaching  the  securities  to  the  draft  (bill  of 
exchange),  the  bill  is  a  value  bill. 

VOTING  TRUST.  This  is  created  by 
placing  the  stock  of  a  company,  either  all  or  a 
majority,  in  a  trust,  usually  for  a  specified 
period,  for  voting  purposes.  Thus,  the  control 
of  the  company  is  locked  up  in  the  hands  of 
trustees.  Receipts  for  the  stock  are  issued,  and 
these  may  be  dealt  in  and  receive  dividends  the 
same  as  the  stock  itself,  but  they  have  no 
voting  power. 


130  THE  INVESTOR'S  PRIMER 

VOTING  TRUST  CERTIFICATE.  When 
the  stock  of  a  company  is  lodged  in  a 
voting  trust  so  that  the  voting  power  of 
the  stock  is  confined  to  the  trustees  of  the 
voting  trust  (commonly  designated  voting 
trustees),  certificates  or  receipts  for  it,  called 
voting  trust  certificates,  are  issued  in  place  of 
and  represent  ownership  of  the  stock.  The 
certificates  are  dealt  in  and  transferred  the 
same  as  the  stock,  and  when  the  voting  trust 
terminates  or  is  dissolved  the  certificates  are 
exchanged  for  the  stock  itself. 

If  dividends  are  declared  on  the  stock  while 
the  voting  trust  is  in  force,  they  are  paid  to  the 
holders  of  the  voting  trust  certificates.  The 
certificates,  in  brief,  are  in  all  respects  the 
equivalent  of  the  stock,  with  the  exception  that 
they  do  not  possess  voting  power. 

WASHING.  A  Wall  Street  colloquialism 
used  to  describe  the  operation  of  simultane- 
ously buying  and  selling  the  same  stock  for  the 
purpose  of  making  quotations,  and  generally 
for  the  purpose  of  inducing  speculation  in  the 
stock  by  imparting  apparent  activity  to  it. 
The  transaction  is  fictitious  and  so  is  the  price. 

WATERED  STOCK.  A  colloquialism  used 
when  the  capital  stock  of  a  company  is  in- 


THE   INVESTOR'S  PRIMER  131 

creased  in  amount  without  a  corresponding  in- 
crease in  assets.  When  a  stock  is  declared  the 
original  stock  is  watered  to  that  extent,  unless 
the  new  stock  represents  added  property  or 
value  in  some  form. 

WHEN  ISSUED.  A  term  employed  when 
dealing  in  a  stock  not  yet  issued.  When  a 
stock  is  sold  "w.  i."  it  is  deliverable  when,  as 
and  if  issued.  This  is  a  stock  future  corres- 
ponding to  a  grain,  cotton  or  coffee  future,  ex- 
cept that  it  is  indefinite  as  to  time. 

X-D.  Ex-dividend,  that  is,  without  the  divi- 
dend. If  a  stock  upon  which  a  dividend  has 
been  declared  is  sold  and  the  sale  is  not  to  in- 
clude the  amount  of  the  dividend,  the  stock  is 
sold  ex-dividend. 

X-I.  Ex-interest;  that  is,  without  interest, 
or  in  other  words,  interest  not  included. 


PART  II. 


Characteristics  of  Leading  Steam  Rail- 
road Preferred  Stock  Issues. 

ATCHISON,  TOPEKA  &  SANTA  FE  RY  CO. 
5%  NON-CUMULATIVE  PREFERRED  STOCK. 
The  total  capital  of  this  system  consists  of  $114,199,- 
530  preferred  and  $102,998,000  common  stock.  Par 
of  both  issues,  $100.  The  preferred  stock  has  pref- 
erence as  to  assets  and  non-cumulative  dividends  not 
exceeding  5%  per  annum,  as  declared  out  of  net 
profits.  No  new  mortgage  or  increase  in  preferred 
stock  can  be  made  without  the  consent  of  a  majority 
of  all  the  preferred  stock  and  of  all  the  common 
stock  represented  at  the  meeting.  Dividends  on  the 
preferred  stock  are  paid  semi-annually,  June  &  De- 
cember 1,  by  check.  Listed  on  the  New  York  Stock 
Exchange.  Transfer  office,  5  Nassau  St.,  New  York. 

BALTIMORE  &  OHIO  RR  CO.  4%  NON-CUMU- 
LATIVE PREFERRED  STOCK.  The  total  out- 
standing capital  of  this  system  consists  of  $60,000,000 
preferred  and  $152,604,100  common.  Par  of  both  is- 
sues, $100.  The  preferred  stock. has  preference  as  to 
assets  and  non-cumulative  dividends,  not  exceeding 
4%  per  annum  as  declared  out  of  net  profits.  Both 
classes  of  stock  were  vested  in  a  voting  trust  for 
five  years  from  July  1,  1899,  but  the  trust  was  dis- 
solved and  the  trustees  delivered  the  stock  on  Sep- 
tember 12,  1902.  Dividends  on  the  preferred  stock 

195 


136  THE  INVESTOR'S  PRIMER 

are  paid  semi-annually  March  &  September  1  by 
chock.  Listed  on  the  New  York  Stock  Exchange. 
Transfer  agent,  E.  M.  Deveraux,  2  Wall  St.,  New 
York. 

BUFFALO,  ROCHESTER  &  PITTSBURGH 
RY  6%  NON-CUMULATIVE  PREFERRED 
STOCK.  The  total  outstanding  capital  of  this 
system  consists  of  $6,000,000  preferred  and  $10,500,- 
000  common.  Par  of  both  issues,  $100.  The  pre- 
ferred stock  has  preference  as  to  assets  and  non- 
cumulative  dividends  not  exceeding  6%  per  annum. 
After  the  preferred  and  common  stocks  have  both 
received  6%  dividends  in  any  one  year,  both  classes 
of  stock  share  equally  in  any  further  dividend.  Pay- 
ments on  preferred  stock  are  made  semi-annually 
February  and  August  15,  by  check.  Six  per  cent,  has 
been  regularly  paid  on  both  classes  for  some  years. 
Listed  on  the  New  York  Stock  Exchange.  Transfer 
agent,  John  H.  Hocart,  36  Wall  St.,  New  York. 

CANADIAN  PACIFIC  RY  4%  NON-CUMULA- 
TIVE PREFERRED  STOCK.  Total  outstanding 
capital  of  this  system  consists  of  $37,853,333  pre- 
ferred and  $121,680,000  common.  Par  of  both  issues, 
$100.  The  preferred  stock,  commonly  called  prefer- 
ence, has  equal  voting  power  with  the  common;  has 
preference  to  4%  non-cumulative  dividends  and  must 
never  exceed  one-half  the  amount  of  common  stock 
outstanding.  Payments  of  dividends  are  made  semi- 
annually  April  &  October  1  by  check.  Transfer 
agent,  Bank  of  Montreal,  Montreal,  London  and 
New  York. 

CHICAGO  &  ALTON  RR  4%  NON-CUMULA- 


THE  INVESTOR'S   PRIMER  137 

TIVE  PREFERRED  STOCK.  Total  outstanding 
capital  of  this  system  consists  of  $899,300  4%  cumu- 
lative participating  and  prior  lien  stock;  $19,544,000 
4%  non-cumulative  preferred  and  $19,542,800  com- 
mon. Par,  $100.  The  cumulative  4%  participating 
and  prior  lien  stock  has  priority  for  dividends  up  to 
4%,  and  is  entitled  to  receive  additional  dividends 
equal  to  the  rate  of  dividends,  if  any,  declared  on  the 
common  stock.  The  non-cumulative  preferred  has 
preference  to  the  4%  dividend  over  the  common 
stock.  Listed  on  the  New  York  Stock  Exchange. 

CHICAGO  &  NORTHWESTERN  RY  7%  NON- 
CUMULATIVE  PREFERRED.  Total  outstanding 
capital  of  this  system  consists  of  $22,395,000  preferred 
and  $99,516,200  common.  Par  of  both  classes,  $100. 
Preferred  stock  has  prior  right  to  dividends  up  to 
7%  per  annum,  after  which  the  common  stock  is  en- 
titled to  7%;  then  the  preferred  is  entitled  to  3% 
more,  and  then  the  common  to  3%  more,  after  which 
both  share  alike  in  any  further  distribution.  Pre- 
ferred dividends  are  paid  quarterly  January,  by 
check.  Listed  on  the  New  York  Stock  Exchange. 
Transfer  office,  52  Wall  St.,  New  York. 

CHICAGO,  ST.  PAUL,  MINNEAPOLIS  & 
OMAHA  RY  PREFERRED  STOCK.  Total  out- 
standing capital  of  this  system  $11,259,911  preferred 
and  $18,558,963  common.  Par  of  both  classes,  $100. 
Preferred  stock  has  preference  as  to  7%  non-cumu- 
lative dividend,  then  common  stock  is  to  receive  7%, 
after  which  both  stocks  share  equally  in  any  further 
distribution  of  earnings.  Dividends  are  paid  semi- 
annually  February  &  August  20  by  check.  Listed 


138  THE  INVESTOR'S  PRIMER 

on  the  New  York  Stock  Exchange.    Transfer  office, 
52  Wall  St.,  New  York. 

CHICAGO,  MILWAUKEE  &  ST.  PAUL  RY 
PREFERRED  STOCK.  Total  outstanding  capital 
of  this  system,  $49,654,400  non-cumulative  preferred 
and  $58,183,900  common.  Par  of  both  classes,  $100. 
Preferred  stock  has  preference  as  to  dividends  up 
to  7%  per  annum,  after  which  common  stock  is  to 
receive  7%,  then  both  issues  share  equally  in  any 
further  distribution  of  earnings.  Dividends  paid 
semi-annually  April  &  October  25  by  check.  Listed 
on  New  York  Stock  Exchange.  Transfer  office,  30 
Broad  St.,  New  York. 

CHICAGO  TERMINAL  TRANSFER  RR  PRE- 
FERRED STOCK.  Total  outstanding  capital  of 
this  system,  $17,000,000  preferred  and  $13,000,000 
common.  Par  of  both  classes,  $100.  Preferred  stock 
has  preference  as  to  assets  and  4%  non-cumulative 
dividends.  Any  further  distribution  above  this  4% 
goes  to  the  common  stock.  Dividends  on  preferred 
are  payable  semi-annually,  but  none  have  been  de- 
clared as  yet.  Listed  on  New  York  Stock  Exchange. 
Transfer  office,  30  Broad  St.,  New  York. 

COLORADO  &  SOUTHERN  RY  PREFERRED 
STOCKS.  Total  outstanding  capital  consists  of  $8,- 
500,000  first  4%  non-cumulative  preferred,  $8,500,000 
second  4%  non-cumulative  preferred  and  $31,000,000 
common  stock.  Par  of  all  classes,  $100.  The  first 
preferred  has  preference  as  to  assets  and  4%  divi- 
dends over  the  other  classes;  the  second  preferred 
has  preference  to  assets  and  4%  dividends  over  the 
common  stock.  Any  further  division  of  profit  goes  to 


THE  INVESTOR'S   PRIMER  139 

the  common  stock.  Dividends  on  the  first  preferred 
have  been  paid  at  varying  rates,  but  none  on  the  sec- 
ond preferred.  Listed  on  New  York  Stock  Ex- 
change. Transfer  agent,  Hallgarten  &  Co.,  5  Nassau 
St.,  New  York. 

DENVER  &  RIO  GRANDE  RR  PREFERRED 
STOCK.  Total  outstanding  capital  consists  of  $50,- 
000,000  5%  non-cumulative  preferred  and  $38,000,000 
common.  Par  of  both  classes,  $100.  Preferred  has 
preference  as  to  assets  and  5%  non-cumulative  divi- 
dends, but  is  entitled  to  no  further  share  of  the 
profits.  Dividends  are  paid  on  preferred  semi-an- 
nually  January  &  July  15  by  check.  Listed  on  New 
York  Stock  Exchange.  Transfer  office,  195  Broad- 
way, New  York. 

ERIE  RR  PREFERRED  STOCKS.  Total  capi- 
tal consists  of  $48,000,000  4%  non-cumulative  first 
preferred,  $16,000,000  4%  non-cumulative  second  pre- 
ferred, and  $153,000,000  common  stock.  Par  of  all 
classes,  $100.  The  first  preferred  has  preference  as 
to  assets  and  4%  non-cumulative  dividends.  The 
second  preferred  has  preference  over  the  common 
as  to  assets  and  4%  non-cumulative  dividends.  All 
additional  divisions  of  earnings  above  these  pre- 
ferred dividends  are  to  go  to  the  common  stock.  No 
additional  mortgage  can  be  placed  upon  the  prop- 
erty, nor  the  amounts  of  the  preferred  stocks  in- 
creased without  the  consent  of  a  majority  of  the  en- 
tire preferred  stock  and  of  such  of  the  common 
stock  as  may  be  represented  at  a  stockholders'  meet- 
ing called  for  the  purpose.  The  company  reserves 
the  right  to  retire  either  or  both  of  its  preferred 
stocks  at  par.  Dividends  on  the  first  preferred  are 


140  THE  INVESTOR'S   PRIMER 

paid  semi-annually  February  28  and  August  31,  and 
on  second  preferred  semi-annual  April  &  October 
10.  In  1907,  a  dividend  on  the  second  preferred  stock 
was  omitted  in  cash  and  paid  in  warrants.  Listed  on 
New  York  Stock  Exchange.  Transfer  agents,  J.  P. 
Morgan  &  Co.,  New  York. 

GREAT  NORTHERN  RY  PREFERRED 
STOCK.  Total  authorized  capital  consists  of  $210,- 
000,000  of  preferred  stock.  No  common  stock  has 
ever  been  issued  and  therefore  the  outstanding  capi- 
tal consists  entirely  of  preferred.  Dividends  are  paid 
at  the  rate  of  7%  per  annum.  Par  value,  $100.  Listed 
on  New  York  Stock  Exchange.  Transfer  office,  31 
Nassau  St.,  New  York. 

HOCKING  VALLEY  RY  PREFERRED  STOCK. 

Total  authorized  capital,  $15,000,000  4%  non-cumula- 
tive preferred  and  $11,000,000  common.  Par  of  both 
issues,  $100.  Preferred  stock  has  preference  as  to 
assets  and  4%  dividends  and  is  redeemable  at  any 
time  at  par  at  the  option  of  the  company.  After 
both  the  common  and  preferred  stocks  have  re- 
ceived 4%  dividends  in  any  one  year  they  share  alike 
in  any  further  distribution  for  such  year.  Dividends 
on  preferred  are  paid  semi-annually  January  &  July 
1.  Listed  on  New  York  Stock  Exchange.  Transfer 
agents,  J.  P.  Morgan  &  Co.,  New  York. 

MINNEAPOLIS  &  ST.  LOUIIS  RR  PRE- 
FERRED STOCK.  Total  authorized  capital,  $4,- 
000,000  non-cumulative  preferred  and  $6,000,000  com- 
mon. Par  of  both  classes,  $100.  Preferred  stock 
has  preference  as  to  assets  and  5%  dividends,  but 
both  stock  participates  equally  in  any  further  dis- 


THE  INVESTOR'S  PRIMER  141 

tribution.  Payments  on  preferred  are  to  be  made 
semi- annually  January  &  July  15  by  check.  Listed 
on  New  York  Stock  Exchange.  Transfer  office,  Cen- 
tral Trust  Co.,  New  York. 

MISSOURI,  KANSAS  &  TEXAS  RY  PRE- 
FERRED STOCK.  Total  outstanding  capital,  $13,- 
000,000  4%  non-cumulative  preferred  and  $63,300,300 
common.  Par  of  both  classes,  $100.  The  preferred 
stock  has  preference  as  to  assets  and  4%  non-cumu- 
lative dividends,  the  common  receiving  all  further 
distributions  of  earnings.  Preferred  dividends  paid 
semi-annually  May  &  November  by  check.  Listed 
on  New  York  Stock  Exchange.  Transfer  office,  49 
Wall  St.,  New  York. 

NORFOLK  &  WESTERN  RY  PREFERRED 
STOCK.  Total  authorized  capital,  $23,000,000  4% 
non-cumulative  adjustment  preferred  stock  and 
$100,000,000  common  stock.  Par  of  both  classes, 
$100.  The  preferred  stock  has  preference  as  to  as- 
sets and  4%  non-cumulative  dividends,  the  common 
receiving  the  entire  balance  of  dividends  if  any  are 
declared.  Preferred  dividends  are  paid  semi-annually 
February  &  August  16.  Listed  on  New  York  Stock 
Exchange.  Transfer  agent,  Guaranty  Trust  Co., 
New  York. 

PITTSBURGH,  CINCINNATI,  CHICAGO  & 
ST.  LOUIS  PREFERRED  STOCK.  Total  out- 
standing capital,  $27,457,274  4%  preferred  and  $24,- 
780,851  common.  Par  of  both  classes,  $100.  Pre- 
ferred stock  is  non-cumulative  and  is  entitled  to  4% 
dividends  per  annum  with  the  right  to  an  additional 
1%  after  3%  has  been  paid  on  the  common,  thus 


142  THE  INVESTOR'S  PRIMER 

making  5%  in  all  for  the  preferreb!.  After  S%  has 
been  paid  on  both  the  common  and  preferred,  both 
stocks  share  alike  in  any  further  distribution.  Pre- 
ferred dividends  are  paid  semi-annually  January  and 
July  15  by  check.  Listed  on  New  York  Stock  Ex- 
change. Transfer  agent,  Farmers'  Loan  &  Trust 
Co.,  New  York. 

READING  COMPANY  PREFERRED  STOCKS. 

Total  authorized  capital,  $28,000,000  first  4%  non- 
cumulative  preferred,  $42,000,000  second  4%  non- 
cumulative  preferred  and  $70,000,00  common  stock. 
Par  of  all  classes,  $50.  The  company  may,  after 
dividends  of  4%  have  been  paid  on  the  first  preferred 
for  two  consecutive  years,  convert  the  second  pre- 
ferred into  one-half  first  preferred  and  one-half  com- 
mon stock.  No  additional  mortgage  can  be  placed 
upon  the  property,  nor  can  the  first  preferred  stock 
be  increased,  without  the  consent  of  a  majority  of 
the  holders  of  both  preferred  stocks  and  of  a  majority 
of  holders  of  common  stock.  The  company  had  the 
right  to  retire  either  or  both  classes  of  preferred  stock 
at  par  in  cash  at  any  time.  Par  of  all  classes,  $50. 
The  first  preferred  is  entitled  to  4%  non-cumulative 
dividends,  the  second  preferred  also  to  4%,  after  the 
first  preferred  has  received  4%,  and  the  common 
receives  all  additional  dividends.  Payments  are 
made  semi-annually  on  first  preferred,  March  &  Sep- 
tember 10;  on  second  preferred,  May  &  November 
10,  and  on  common,  February  &  August  1,  all  by 
check.  Listed  on  New  York  Stock  Exchange. 
Transfer  agents,  J.  P.  Morgan  &  Co.,  New  York. 

ROCK     ISLAND     COMPANY     PREFERRED 
STOCK.    Total  capital  outstanding  $54,000,000  non- 


THE  INVESTOR'S  PRIMER  143 

cumulative  preferred  and  $96,000,000  common  stock. 
Par  of  both  classes,  $100.  The  preferred  stock  has 
preference  as  to  assets  and  also  to  non-cumulative 
dividends  up  to  4%  yearly  to  and  including  1909,  up 
to  5%  yearly  to  and  including  1916,  and  6%  there- 
after. Preferred  stock  can  only  be  increased  with 
the  consent  of  two-thirds  of  the  outstanding  issue 
of  both  classes  of  stock.  The  preferred  stockholders 
are  entitled  to  elect  a  majority  of  the  board  of  di- 
rectors. No  dividends  are  now  being  paid  on  the 
preferred.  Listed  on  the  New  York  Stock  Exchange. 
Transfer  office,  71  Broadway,  New  York. 

SEABOARD  COMPANY  PREFERRED 
STOCKS.  Total  outstanding  capital  $6,360,000  first 
preferred,  $15,993,000  second  preferred  and  $28,544,- 
000  common  stock.  Par  of  all  classes,  $100.  The 
first  preferred  has  preference  as  to  assets  and  also 
dividends  of  5%  per  annum  non-cumulative  up  to 
July  1,  1910,  and  cumulative  thereafter.  Convertable 
at  option  of  holder  into  second  preferred  stock  at 
par,  and  redeemable,  at  option  of  company,  if  and 
when  the  law  allows,  after  three  years  from  the  issue 
thereof.  The  second  preferred  is  entitled  to  6%  non- 
cumulative  dividends,  and  is  redeemable  at  the  option 
of  the  company  after  three  years  from  the  issue 
thereof  at  110,  provided  the  first  preferred  shall  have 
been  redeemed  or  converted.  Provision  is  made  for 
increase  of  the  second  preferred  stock  for  purpose 
of  conversion  of  first  preferred.  All  classes  of  stock 
have  equal  voting  power. 

SOUTHERN  PACIFIC  COMPANY  PRE- 
FERRED STOCK.  Total  outstanding  capital  $39,- 
569,840  preferred  and  $197,849,358  common.  Par  of 


144  THE  INVESTOR'S  PRIMER 

both  classes,  $100.  Preferred  stock  is  entitled  to  7% 
non-cumulative  dividends,  is  redeemable  at  the  op- 
tion of  the  holder  at  any  time  between  July  1,  1905, 
and  July  1,  1910,  at  115,  and  is  convertible  into  com- 
mon stock  at  the  option  of  the  holder  at  par  at  any 
time.  Preferred  dividends  are  paid  quarterly  Janu- 
ary 1  by  check.  Listed  on  New  York  Stock  Ex- 
change. Transfer  office,  120  Broadway,  New  York. 

SOUTHERN  RY  PREFERRED  STOCK.    Total 

outstanding  capital  $60,000,000  5%  non-cumulative 
preferred  and  $120,000,000  common  stock.  Par  of 
both  classes,  $100.  Preferred  stock  has  prior  right 
to  assets  and  5%  non-cumulative  dividends  and  no 
additional  mortgage  can  be  put  upon  the  property 
without  the  consent  of  the  holders  of  a  majority  of 
the  preferred  stock.  A  majority  of  both  classes  of 
stock  was  deposited  under  the  reorganization  plan 
in  a  voting  trust  until  the  preferred  stock  should 
have  paid  5%  in  cash  dividends  in  one  year.  This 
was  accomplished  in  1902,  but  a  majority  of  holders 
of  both  stocks  agreed  to  an  extension  of  the  trust 
until  October  15,  1907,  and  thereafter  unless  termin- 
ated by  majority  vote.  Dividends  are  paid  April  & 
October  15  by  check.  Listed  on  New  York  Stock 
Exchange.  Transfer  agents,  J.  P.  Morgan  &  Co., 
New  York. 

UNION  PACIFIC  RR  PREFERRED  STOCK. 
Total  capital  authorized  $200,000,000  4%  non-cumu- 
lative preferred,  and  $196,178,000  common.  Par  of 
both  classes,  $100.  The  preferred  stock  has  prefer- 
ence to  4%  non-cumulative  dividends,  but  is  not  en- 
titled to  any  further  distribution  of  the  net  profits 
of  the  company,  Dividends  are  paid  quarterly  Janu- 


THE  INVESTOR'S  PRIMER  145 

ary  1  by  check.     Listed  on  New  York  Stock  Ex- 
change.   Transfer  office,  120  Broadway,  New  York. 

WABASH  RR  PREFERRED  STOCK.  Total 
capital  outstanding  $40,500,000  7%  non-cumulative 
preferred  and  $169,500,000  common.  Par  of  both 
classes,  $100.  The  preferred  is  entitled  to  7%  non- 
cumulative  dividend  when  earned.  No  dividends 
have  been  paid.  Listed  on  New  York  Stock  Ex- 
change. Transfer  office,  195  Broadway,  New  York. 

WISCONSIN  CENTRAL  RR  PREFERRED 
STOCK.  Total  authorized  capital  $12,500,000  4% 
non-cumulative  preferred  and  $17,500,000  common. 
Par,  $100.  The  preferred  stock  is  entitled  to  4%  non- 
cumulative  dividend  and  after  4%  dividends  have 
been  paid  on  both  classes  of  stock  in  any  one  year 
they  participate  equally  in  any  further  distribution. 
The  preferred  stock  has  the  right  to  elect  a  majority 
of  directors  whenever  for  two  successive  years  divi- 
dends shall  not  have  been  paid  at  4%  in  cash  upon 
the  said  stock.  Listed  on  New  York  Stock  Ex- 
change. Transfer  agent,  Trust  Co.  of  America,  New 
York. 


Characteristics  of  Leading  Guaranteed 
Investment  Stocks 

ALBANY  &  SUSQUEHANNA  RR  9%  GUAR- 
ANTEED STOCK.  Line  of  road,  Albany  to  Bing- 
hamton,  N.  Y.,  142.59  miles.  Capital  stock,  $3,500,- 
000;  par,  $100.  Leased  to  Del.  &  Hud.  Co.  from 
February  24,  1870,  in  perpetuity,  rental  being  interest 
on  bonds,  and  dividends  on  stock  at  rate  of  1% 
per  annum  until  July,  1902,  and  9%  per  annum  there- 
after. Dividends  January  &  July  1,  at  32  Nassau  St., 
New  York.  Transfer  office,  New  York.  Listed  on 
New  York  Stock  Exchange. 

ALLEGHENY  &  WESTERN  RY  6%  GUAR- 
ANTEED STOCK.  Line  of  road,  Lindsey  to 
Butler,  Pa.,  with  branch,  66.16  miles.  Capital  stock, 
$3,200,000;  par,  $100.  Leased  to  Butt.,  Roch.  &  Pitts- 
burg  Ry  Co.  from  January  1  ,1900,  for  term  of  corpo- 
rate existence;  rental  now  $272,000  per  annum,  equal 
to  interest  on  bonds,  and  6%  on  capital  stock.  Divi- 
dends January  &  July  1,  at  A.  Iselin  &  Co.,  36  Wall 
St.,  New  York.  Transfer  agents,  A.  Iselin  &  Co., 
New  York.  Listed  on  New  York  Stock  Exchange. 

AMERICAN  SMELTERS  SECURITIES  CO. 
5%  GUARANTEED  SERIES  "B"  PREFERRED 
STOCK.  Amount  outstanding,  $30,000,000;  par,  $100. 
Guaranteed,  principal  and  dividends,  by  American 

147 


148  THE  INVESTOR'S  PRIMER 

Smelting  &  Refining  Co.  Redeemable  at  par  and  ac- 
crued dividends,  by  American  Smelting  Securities 
Co.,  or  may  be  purchased  at  par  and  accured  divi- 
dends by  Amer.  Smelting  &  Refining  Co.  on  June 
1,  1930,  or  on  any  quarterly  dividend  date  thereafter, 
upon  two  months'  notice.  The  American  Smelting 
&  Refining  Co.  has  agreed  that,  so  long  as  any  of  this 
stock  remains  outstanding,  it  will  issue  no  bonds,  nor 
make  any  further  guarantee  to  any  capital  stock  or 
obligation  which,  including  the  guarantee  of  this 
preferred  stock,  shall  create  a  liability,  actual  or  con- 
tingent, for  interest  or  dividends,  that  shall  in  any 
year  exceed  in  the  aggregate  25%  of  its  net  earnings 
for  the  12  months  next  preceding  the  creation  of 
such  bonds  or  guarantee.  Dividends,  quarterly, 
March  1,  at  71  Broadway,  New  York. 

AMERICAN  TELEGRAPH  &  CABLE  CO.  5% 
GUARANTEED  STOCK.  Outstanding,  $14,000,- 
000;  par,  $100.  Leased  to  Western  Union  Telegraph 
Co.  for  50  years,  from  May  12,  1882,  at  rental  of  5% 
on  stock,  lessee  to  maintain,  operate  and  renew  the 
cables  and  equipment.  Dividends  payable  quarterly, 
March  1,  at  195  Broadway,  New  York.  Transfer 
office,  195  Broadway,  New  York.  Listed  on  New 
York  Stock  Exchange. 

ATLANTA  &  CHARLOTTE  AIR  LINE  RY 
GUARANTEED  STOCK.  Line  of  road,  Charlotte, 
N.  C.,  to  Atlanta,  Ga.,  268.17  miles.  Capital  stock, 
$1,700,000;  par,  $100.  Operated  by  Southern  Ry  Co. 
under  99-year  contract,  dated  April  1,  1881,  which 
calls  for  payment  of  interest  on  bonds,  organization 
expenses  and  minimum  of  5%  on  stock;  dividends 
to  be  increased  to  6%  should  earnings  exceed  $1,- 


THE  INVESTOR'S  PRIMER  149 

500,000,  and  to  7%  should  they  exceed  $2,500,000  in 
any  one  year.  Dividends  have  been  paid  as  follows: 
1881  to  1889,  inclusive,  5%  per  annum;  1890,  5^£%; 
1891  to  March,  1901,  inclusive,  6%  per  annum;  7% 
per  annumt  since.  Dividends  March  &  September  5 
at  U.  S.  Mortgage  &  Trust  Co.,  New  York.  Transfer 
office,  Central  Trust  Co.,  New  York. 

BALD  EAGLE  VALLEY  RR  10%  GUARAN- 
TEED STOCK.  Line  of  road,  Lock  Haven  to  Vail 
Station,  Pa.,  and  branches,  93.95  miles.  Capital  stock 
authorized,  $2,600,000;  outstanding,  $1,673,150;  par, 
$50.  Leased  to  Penna.  RR  for  99  years  from  De- 
cember 7,  1864,  at  net  earnings  for  the  section  oper- 
ated as  part  of  Phila.  &  Erie  Div.  and  40%  of  gross 
earnings,  60%  of  taxes  on  gross  receipts  and  tax  on 
bonds  for  section  operated  in  Penn.  Division.  Semi- 
annual dividends  of  5%  are  paid  February  &  August 
1,  at  Broad  St.  Station,  Phila.;  on  May  1,  1906,  a  9% 
stock  dividend  was  paid.  Transfer  office,  Broad 
Street  Station,  Philadelphia,  Pa. 

BE^CH  CREEK  RR  4%  GUARANTEED 
STOCK.  Line  of  road,  Jersey  Shore  to  Mahaffey 
June.,  Pa.,  and  branches,  167.28  miles.  Capital  stock, 
$6,000,000;  par,  $50.  Leased  to  N.  Y.  C.  &  Hudson 
River  RR  for  999^  years,  from  October  1,  1890,  at 
rental  of  interest  on  bonds  and  4%  on  stock.  Divi- 
dends quarterly,  January  1,  at  Grand  Central  Station, 
New  York.  Listed  on  New  York  Stock  Exchange. 
Transfer  office,  Grand  Central  Station,  New  York. 

BOSTON  &  ALBANY  RR  8%  GUARANTEED 
STOCK.  Line  of  road,  Boston,  Mass.,  to  Albany, 
N.  Y.,  and  branches,  304.09  miles.  Capital  stock 


150  THE  INVESTOR'S  PRIMER 

authorized,  $30,000,000;  outstanding,  $25,000,000;  par, 
$100.  Leased  to  N.  Y.  Central  &  Hudson  River  RR 
for  99  years,  from  July  1,  1900,  at  rental  of  guaran- 
teed dividends  of  8%  on  stock,  organization  ex- 
penses, interest  on  bonds,  taxes,  expenses  of  mainte- 
nance, etc.  The  Boston  &  Albany  RR  received  $5,- 
500,000  N.  Y.  Central  3^%  100-year  debentures  to 
cover  certain  property  not  included  in  the  lease, 
which  yield  about  0.77%  additional  per  annum  on  the 
stock.  Dividends,  quarterly,  March  31,  at  Term. 
Station,  Boston.  For  many  years  prior  to  the  lease, 
8%  per  annum  was  paid;  from  1901  to  date  8^4%, 
viz.,  2%  in  March,  2y2%  in  June;  2%  in  September 
and  2}4%  in  December;  payments  at  treasurer's 
office,  Boston.  Listed  on  Boston  Stock  Exchange. 
Transfer  office,  Boston,  Mass. 

BOSTON  &  LOWELL  RR  8%  GUARANTEED 
STOCK.  Lines  of  road,  Boston  to  Lowell,  Mass., 
with  branches,  96.95  miles.  Capital  stock,  $6,599,400; 
par,  $100.  Leased  to  Boston  &  Maine  RR  for  99 
years,  from  April  1,  1887.  Rental,  7%  on  stock  for 
first  ten  years;  thereafter  8%,  together  with  interest 
on  bonds  and  $7,000  for  organization  expenses.  Divi- 
dends, January  and  July  2,  at  treasurer's  office,  Bos- 
ton. Listed  on  Boston  Stock  Exchange.  Transfer 
office,  Treas.  of  Company,  Boston,  Mass. 

BOSTON  &  NEW  YORK  AIR  LINE  RR  4% 
GUARANTEED  PREFERRED  STOCK.  Line  of 
road,  New  Haven  to  Willimantic,  Conn.,  52.26  miles. 
Preferred  stock  $2,998,500,  of  which  $1,738,000  has 
been  exchanged  for  N.  Y.,  N.  H.  &  H.  RR  Co.  stock. 
Leased  to  N.  Y.,  N.  H.  &  Hartford  RR  for  99  years, 
from  October  1,  1882,  at  rental  of  interest  on  bonds, 


THE  INVESTOR'S   PRIMER  151 

taxes  and  4%  on  preferred  stock.  Dividends,  August 
&  October,  in  New  Haven,  Conn.  Listed  on  New 
York  Stock  Exchange.  Transfer  office,  New  Haven, 
Conn. 

BOSTON  &  PROVIDENCE  RR  10%  GUARAN- 
TEED STOCK.  Line  of  road,  Boston,  Mass.,  to 
Providence,  R.  I.,  and  branches,  63.03  miles.  Capi- 
tal stock,  $4,000,000;  par,  $100.  Leased  to  Old 
Colony  RR  for  99  years,  from  April  1,  1888,  at  rental 
of  interest  on  bonds,  dividends  of  10%  per  annum  on 
stock  and  $3,000  per  annum  for  organization  ex- 
penses. The  Old  Colony  RR  was  leased  to  the  N. 
Y.,  N.  Haven  &  Hartford  RR  for  99  years,  from 
March  1,  1893,  the  lessee  assuming  all  liabilities. 
Dividends,  quarterly,  January,  at  Boston  Terminal 
Station.  Listed  on  Boston  Stock  Exchange.  Trans- 
fer office,  Terminal  Station,  Boston,  Mass. 

BROADWAY  &  SEVENTH  AVENUE  RR  10% 
GUARANTEED  STOCK.  Capital  stock,  $2,100,000; 
par,  $100.  Leased  May  13,  1890,  for  unexpired  term 
of  charter  and  for  any  extensions  thereof,  to  Hous- 
ton, West  St.  &  Pavonia  Ferry  RR,  now  Met  St.  Ry, 
at  annual  rental  of  interest  on  bonds  and  10%  on 
stcck.  Under  the  lease  of  the  Met.  St.  Ry  to  Inter- 
urban  St.  Ry,  road  is  now  operated  by  New  York 
City  Ry.  Dividends,  quarterly,  January,  at  621 
Broadway,  New  York.  Transfer  office,  621  Broad- 
way, New  York. 

BROOKLYN  CITY  RR  10%  GUARANTEED 
STOCK.  Capital  stock,  $12,000,000;  par,  $10.  Leased 
on  February  14,  1893,  for  999  years  to  Brooklyn 
Heights  RR  Co.,  at  annual  rental  of  all  fixed  charges, 


152  THE  INVESTOR'S   PRIMER 

organization  expenses,  taxes  and  dividends  of  10% 
per  annum  on  the  stock.  Dividends  quarterly,  Janu- 
ary 15,  at  Long  Island  Loan  &  Trust  Co.,  Brooklyn. 
New  York,  by  mail.  Transfer  office,  44  Court  St., 
Brooklyn. 

CATAWISSA  RR  5%  GUARANTEED  PRE- 
FERRED STOCK.  Line  of  road,  Tamanend  to 
Newberry  Junction,  Pa.,  and  branches,  102.95  miles. 
Preferred  stocks,  $2,200,000  first  preferred  and  $1,- 
000,000  second  preferred;  par,  $50.  Leased  December 
1,  1896,  to  the  Phila.  &  Reading  Ry  for  999  years  at 
guaranty  of  principal  and  interest  on  the  bonds,  be- 
sides taxes,  $8,000  a  year  for  organization,  and  5% 
per  annum  on  both  classes  of  preferred  stock.  Divi- 
dends payable  May  &  November,  at  company's  office, 
Philadelphia.  Listed  on  Philadelphia  Stock  Ex- 
change. Transfer  office,  237  South  Third  St.,  Phila- 
delphia, Pa. 

CHICAGO  &  EASTERN  ILLINOIS  RR  STOCK 
TRUST  CERTIFICATES.  $10,416,000  common 
stock  trust  certificates,  due  July  1,  1942,  in  denomi- 
nation of  $1,000  each.  Each  certificate  of  $1,000  is 
secured  by  4  shares  of  Chicago  &  Eastern  Illinois 
common  stock.  Interest  at  4%  per  annum  is  guar- 
anteed by  the  St.  Louis  &  San  Francisco  RR  Co., 
payable  January  &  July,  by  mail.  Redeemable  at 
par  and  accrued  interest  at  any  time. 

$3,051,400  common  stock  trust  certificates,  due 
July  1,  1942.  Par,  $100.  Issued  against  an  equal 
amount  of  Chicago  &  Eastern  Illinois  common  stock. 
Dividends  of  10%  per  annum  are  guaranteed  by  the 
St.  Louis  &  San  Francisco  RR  Co.,  payable  Janu- 


THE  INVESTOR'S   PRIMER  153 

ary  &  July,  by  mail.  Redeemable  at  250  and  accrued 
dividends  at  any  time. 

In  1905,  the  holders  of  common  stock  trust  cer- 
tificates were  given  the  privilege  of  exchanging  their 
certificates,  representing  shares  of  Chicago  &  East- 
ern Illinois  common  stock,  for  new  certificates  in 
the  denomination  of  $1,000  each,  bearing  4%  interest. 
Up  to  April  30,  1907,  all  but  $3,051,400  had  been  so 
exchanged. 

$6,211,700  preferred  stock  trust  certificates;  due 
July  1,  1942;  par,  $100.  Issued  against  an  equal 
amount  of  Chicago  &  Eastern  Illinois  preferred 
stock.  Dividends  of  6%  per  annum  are  guaranteed 
by  the  St.  Louis  &  San  Francisco  RR  Co.,  payable 
quarterly,  January,  by  mail.  Redeemable  at  150  and 
accrued  dividends  at  any  time.  Listed  on  New  York 
Stock  Exchange. 

CLEARFIELD  &  MAHONING  RY  6%  GUAR- 
ANTEED STOCK.  Line  of  road,  DuBois  Junction 
to  Clearfield,  Pa.,  25.87  miles.  Capital  stock,  $750,- 
000;  par,  $50.  Leased  to  Buff.,  Roch.  &  Pitts.  Ry 
from  January  3,  1893,  for  term  of  its  corporate  exist- 
ence at  rental  of  interest  on  bonds,  and  6%  on  stock. 
Dividends,  January  &  July  1,  checks  mailed.  Trans- 
fer agent,  John  G.  Whitmore,  Ridgway,  Pa. 

CLEVELAND  &  MAHONING  VALLEY  RY 
GUARANTEED  STOCK.  Line  of  road,  Cleveland, 
O.,  to  Pa.  State  line,  and  Niles  to  New  Lisbon,  O., 
with  branches,  123.94  miles.  Capital  stock,  $3,259,- 
200,  of  which  $2,258,250  is  held  by  Atlan.  First  Leased 
Lines  Rental  Trust  Co.,  Ltd.,  of  London;  par,  $100. 
Leased  to  Erie  RR  until  October  1,  1982,  at  rental 
of  $525,967  per  annum,  payable  monthly.  This  rental 


154  THE  INVESTOR'S   PRIMER 

pays  interest  on  bonds  and  dividends  on  stock.  In 
1897,  13^4%  was  paid;  1898  to  1904,  inclusive,  13%% 
per  annum;  1905,  11.42%;  in  1906,  11.4%;  payable 
quarterly  (March)  at  Treasurer's  office,  Cleveland, 
Ohio. 

** 

CLEVELAND  &  PITTSBURG  RR  GUARAN- 
TEED STOCKS.  Line  of  road,  Cleveland,  O.,  to 
Rochester,  Pa.,  with  branches  and  22.90  miles  of 
trackage,  224.64  miles.  Capital  stock,  $11,247,593  7% 
guaranteed  stock  and  $7,477,800  4%  guaranteed  spe- 
cial betterment  stock;  par,  $50.  The  special  better- 
ment stock  is  issuable  for  improvements  and  is  sub- 
ordinate to  the  original  stock  as  to  dividends  only. 
Leased  for  999  years  from  December  1,  1871,  to 
Penna.  RR;  lease  transferred  to  Penna.  Co.,  April 
14,  1873;  rental  7%  on  stock,  interest  on  bonds,  sink- 
ing fund,  and  $10,000  for  organization  expenses. 
Dividends  quarterly  (March  1),  at  Winslow,  Lanier 
&  Co.,  New  York.  Listed  on  New  York  Stock  Ex- 
change. Transfer  agent,  Winslow,  Lanier  &  Co., 
New  York. 

COLUMBUS  &  XENIA  RR  8%  GUARANTEED 
STOCK.  Line  of  road:  Columbus  to  Xenia,  O., 
54.70  miles.  Capital  stock,  $1^86,200;  par,  $50. 
Leased  Nov.  30,  1868,  for  99  years,  with  privilege  of 
renewal,  to  Little  Miami  RR  &  sub-leased  in  De- 
cember, 1869,  together  with  Little  Miami  to  Pitts., 
Cin.  &  St.  L.  Ry  (now  Pitts.,  Cin.,  Chic.  &  St.  L.). 
Rental,  8%  per  annum  on  stock  and  interest  on 
bonds.  The  bonds  matured  September  1,  1890. 
Lease  is  guaranteed  by  Penna.  RR.  Dividends,  quar- 
terly, March  10,  at  Treasurer's  office,  Columbus,  O. 
Transfer  office,  Columbus,  O. 


THE  INVESTOR'S   PRIMER  155 

CONCORD  &  MONTREAL  RR  7%  GUARAN- 
TEED STOCK.  Line  of  road  owned,  Nashua  to 
Groveton,  N.  H.,  with  branches,  368  miles.  Capital 
stock,  $7,447,600;  par,  $100;  divided  into  four  classes 
as  follows:  $800,000  class  1;  $540,400  class  2;  $459,600 
class  3;  $5,647,600  class  4.  Leased  together  with  its 
proprietary,  controlled  and  leased  lines,  to  Boston 
&  Maine  RR  for  91  years,  from  April  1,  1895;  lease 
to  go  to  Boston  &  Lowell  RR,  in  case  same  termi- 
nates before  91  years  have  elapsed.  Lessee  assumed 
all  the  liabilities,  and  by  agreement  pays  7%  on 
stocks  as  rental.  Dividends,  quarterly,  January  1, 
by  check.  Listed  on  Boston  Stock  Exchange. 
Transfer  office,  Concord,  N.  H. 

CONNECTICUT  &  PASSUMPSIC  RIVERS  RR 
6%  GUARANTEED  STOCK.  Line  of  road,  White 
River  Junction,  Vt.,  to  Canadian  line,  110.30  miles. 
Capital  stock,  $2,500,000;  par,  $100.  Leased  for  99 
years,  from  January  1,  1887,  to  Boston  &  Lowell  RR 
(B.  &  M.  System)  at  rental  of  interest  on  bonds  and 
dividends  at  5%  per  annum  until  January,  1897,  and 
6%  thereafter;  also  $3,000  for  expenses  of  organiza- 
tion. Dividends,  February  &  August,  at  Boston  Safe 
Deposit  &  Trust  Co.  Transfer  office,  Boston,  Mass. 
Listed  on  Boston  Stock  Exchange. 

CONNECTICUT  RIVER  RR  10%  GUARAN- 
TEED STOCK.  Line  of  road,  Springfield,  Mass.,  to 
Keene,  N.  H.,  and  branches,  79.85  miles.  Capital 
stock,  authorized,  $3,670,300;  outstanding,  $3,113,000; 
par,  $100.  Leased  to  Boston  &  Maine  RR  for  99 
years,  from  January  1,  1893,  at  rental  of  10%  per 
annum  on  stock,  interest  on  bonds  and  $2,000  for 
organization  expenses.  Dividends  January  &  July  1, 


156  THE  INVESTOR'S   PRIMER 

at  B.  &  M.  office,  Boston,  Mass.  Transfer  office, 
Springfield,  Mass.  Listed  on  Boston  Stock  Ex- 
change. 

DAYTON  &  MICHIGAN  RR  GUARANTEED 
8%  PREFERRED  AND  $ya%  COMMON  STOCK. 
Line  of  road:  Dayton  to  Toledo  Junction,  O.,  141.82 
miles.  Capital  stock,  $1,211,250  preferred,  and  $2,- 
401,900  common;  par,  $50.  Leased  in  perpetuity 
from  May  1,  1863,  to  Cine.,  Ham.  &  Day.  Ry  at 
rental  of  interest  on  bonds,  8%  on  preferred  stock 
and  y/2.%  per  annum  on  common.  Dividends  on  pre- 
ferred, quarterly,  January  (first  Tuesday);  on  com- 
mon, August  &  October,  in  Cincinnati,  O.  Transfer 
office,  Cincinnati,  O. 

DELAWARE  &  BOUND  BROOK  RR  8% 
GUARANTEED  STOCK.  Line  of  road,  Bound 
Brook  Junction,  N.  J.,  to  Penn.  State  line,  and 
branches,  30.81  miles.  Capital  stock,  $1,800,000;  par, 
$100.  Leased  for  990  years,  from  May  12,  1879,  to 
Phila.  &  Reading  RR,  and  assumed  by  Phila.  & 
Read.  Ry  in  the  reorganization.  Rental,  maintenance 
expenses,  interest  on  bonds  and  8%  per  annum  on 
stock.  Dividends,  quarterly,  February  20,  at  240 
South  Third  St.,  Philadelphia.  Listed  on  Philadelphia 
Stock  Exchange.  Transfer  office,  240  South  Third 
St.,  Philadelphia,  Pa. 

DETROIT,  HILLSDALE  &  SOUTHWESTERN 
RR  4%  GUARANTEED  STOCK.  Line  of  road, 
Ypsilanti  to  Bankers,  Mich.,  64.76  miles.  Capital 
stock,  $1,350,000;  par,  $100.  Leased  in  perpetuity, 
from  July  1,  1881,  to  Lake  Shore  &  Mich.  Southern 
Ry  at  annual  rental  of  $54,000,  being  4%  on  stock. 


THE  INVESTOR'S   PRIMER  157 

Dividends,  January  &  July  5,  at  Farmers'  Loan  & 
Trust  Co.,  N.  Y.  Listed  on  New  York  and  Boston 
Stock  Exchanges.  Transfer  offices,  Farmers'  Loan 
&  Trust  Co.,  New  York;  also  Boston. 

ELMIRA  &  WILLIAMSPORT  RR  GUARAN- 
TEED COMMON  AND  PREFERRED  STOCKS. 
Line  of  road,  Williamsport,  Pa.,  to  Elmira,  N.  Y., 
75.50  miles.  Capital  stock,  $500,000  common  and 
$500,000  preferred;  par,  $50.  Leased  for  999  years, 
from  May  1,  1863,  to  Northern  Cent.  Ry  at  rental  of 
interest  on  bonds,  dividends  of  7%  (less  taxes)  on 
preferred  stock  and  5%  (less  taxes)  on  common,  and 
organization  expenses.  The  Northern  Cent.  Ry  is 
controlled  by  Penna.  RR  Co.  through  majority  stock 
ownership,  and  the  obligation  of  the  Northern  Cent., 
under  the  lease,  is  guaranteed  by  Penna.  RR  Co.  Net 
dividends  paid:  6.3%  on  preferred  and  4.48%  on  com- 
mon; payments  on  the  former  are  January  &  July  1, 
and  on  the  latter  May  &  November  1,  at  Broad  St. 
Station,  Philadelphia.  Listed  on  Philadelphia  Stock 
Exchange.  Transfer  office,  Philadelphia,  Pa. 

ERIE  &  PITTSBURG  RR  7%  GUARANTEED 
STOCKS.  Line  of  road,  New  Castle  to  Girard, 
Pa.,  with  branches,  and  16.74  miles  of  trackage,  101.21 
miles.  Capital  stock,  outstanding,  $2,000,000  original 
7%  guaranteed  stock  and  $941,750  (auth.  $2,500,000) 
special  7%  guaranteed  betterment  stock;  par,  $50. 
Leased  for  999  years,  from  March  1,  1870,'  to  Penna. 
RR,  and  lease  subsequently  assigned  to  Penna.  Co. 
Rental,  interest  on  bonds,  7%  per  annum  on  capital 
stock,  and  $2,500  for  organization  purposes.  An  al- 
lowance, amounting  to  about  51  cents  per  share,  for 
Penna.  State  tax,  must  be  made  in  the  net  returns. 


158  THE  INVESTOR'S   PRIMER 

Dividends,  on  both  classes,  paid  quarterly,  March,  at 
Union  Trust  Co.,  New  York.  Transfer  offices,  New 
York  and  Pittsburg. 

EUROPEAN  &  NORTH  AMERICAN  RY  5% 
GUARANTEED  STOCK.  Line  of  road,  Bangor  to 
Vanceboro,  Me.,  with  branches,  120.34  miles.  Capi- 
tal stock,  $2,494,100;  par,  $100.  Leased  from  April  1, 
1882,  to  Maine  Cent.  RR,  for  its  corporate  existence, 
at  an  annual  rental  of  $125,000,  lessee  assuming  all 
liabilities.  Dividends  August  &  October  3,  at  Treas- 
urer's office,  Bangor,  Me. 


FALL  BROOK  RY  7%  PREFERRED  AND 
COMMON  GUARANTEED  STOCK.  Line  of 
road,  Corning,  N.  Y.,  to  Antrim,  Pa.,  and  branches, 
91.51  miles.  Capital  stock,  $500,000  preferred  and 
$4,500,000  common;  par,  $50.  Leased  to  N.  Y.  Cent. 
&  Hudson  River  RR  for  999  years,  from  May  1,  1899, 
at  rental  of  $175,000  per  annum;  also  taxes  and  re- 
pairs. Prior  to  the  lease,  dividends  had  been  paid 
since  1891  at  rate  of  7%  per  annum  on  preferred  and 
6%  on  common;  dividends  on  common  were  re- 
duced to  2yz  %  when  lease  went  into  effect.  Pay- 
ments, quarterly,  (February  5)  at  company's  office, 
Corning,  N.  Y. 

FITCHBURG  RR  5%  GUARANTEED  PRE- 
FERRED STOCK.  Line  of  road  owned,  Green- 
field, Mass.,  to  Rotterdam,  N.  Y.,  with  branches, 
394.14  miles.  Preferred  stock  outstanding,  $17,360,- 
000;  par,  $100.  Leased  to  Bos.  &  Me.  RR,  on  July  1, 
1900,  for  99  years,  at  rental  of  5%  on  preferred,  1% 
on  common  stock,  and  $7,000  for  organization  ex- 
penses, lessee  assuming  all  obligations  of  the  com- 


THE  INVESTOR'S   PRIMER  159 

pany.  Of  the  common  stock,  $5,454,550  was  pur- 
chased by  the  Bos.  &  Me.  RR,  and  the  balance  of 
the  issue,  which  was  in  the  treasury  of  the  company, 
was  turned  over  to  the  lessee  under  the  lease.  Divi- 
dends on  preferred,  quarterly,  January  1,  at  Boston 
&  Maine  office,  Boston.  Listed  on  Boston  Stock 
Exchange.  Transfer  office,  Boston,  Mass. 

FORT  WAYNE  &  JACKSON  RR  S*/2%  GUAR- 
ANTEED PREFERRED  STOCK.  Line  of  road, 
Jackson,  Mich.,  to  Ft.  Wayne,  Ind.,  97.83  miles. 
Preferred  stock  outstanding,  $2,291,416;  par,  $100. 
Leased  in  perpetuity  on  August  24,  1882,  to  Lake 
Shore  &  Mich.  Southern  Ry,  at  rental  of  $126,027, 
equal  to  S%%  on  the  preferred  stock,  and  after  1887, 
any  net  earnings  over  8%  on  preferred  stock  to  be 
paid  on  common,  but  not  exceeding  2%  a  year. 
Dividends,  March  &  September  1,  at  Farmers'  Loan 
&  Trust  Co.,  New  York.  Transfer  office,  Farmers' 
Loan  &  Trust  Co.,  New  York. 

GEORGIA  RR  &  BANKING  CO.  11%  GUAR- 
ANTEED STOCK.  Line  of  road,  Augusta  to  At- 
lanta, Ga.,  and  branches,  303  miles.  Capital  stock, 
$4,200,000;  par,  $100.  T::e  railroad  was  leased  May 
7,  1881,  for  99  years,  to  W.  M.  Wadley,  at  a  rental 
of  $600,000  per  annum,  but  in  April,  1899,  the  Louis- 
ville acquired  all  rights  under  the  lease  and  in  July, 
1899,  the  Atlantic  Coast  Line  acquired  a  half  in- 
terest. As  security  for  the  performance  of  the  terms 
of  the  lease  this  company  holds  $500,000  5%  bonds 
of  the  So.  &  No.  Ala.  RR  and  a  like  amount  of  first 
4s  of  the  Atlantic  Coast  Line  RR  of  S.  C.  Divi- 
dends, 11%  per  annum,  quarterly,  January  15,  at 
Georgia  Railroad  Bank,  Augusta,  Ga.  This  rate  has 


160  THE  INVESTOR'S   PRIMER 

been  paid  since  1889;  prior  to  that  date,  rate  ranged 
from  9%  to  10$4%.     Transfer  office,  Augusta,  Ga. 

GOLD  &  STOCK  TELEGRAPH  CO.  6% 
GUARANTEED  STOCK.  Capital  stock,  $5,000,000; 
par,  $100.  Leased  until  January,  1981,  to  Western 
Union  Telegraph  Co.  Dividends  payable  January  1, 
at  195  Broadway,  N.  Y.  Listed  on  New  York  Stock 
Exchange.  Transfer  office,  195  Broadway,  New 
York. 

ILLINOIS  &  MISSISSIPPI  TELEGRAPH  CO. 
4%  GUARANTEED  STOCK.  Capital  stock,  $1,- 
930,500;  par,  $100.  Leased  in  perpetuity  to  Western 
Union  Telegraph  Co.  Dividends,  January  &  July, 
at  195  Broadway,  New  York.  Transfer  office, 
Ottawa,  111. 

ILLINOIS  CENTRAL  LEASED  LINE  4% 
GUARANTEED  STOCK.  Capital  stock,  $10,000,- 
000;  par,  $100.  Secured  by  deposit  of  $10,000,000 
Chic.,  St.  L.  &  New  Orleans  stock,  which  road  is 
leased  to  the  111.  Cent.  RR  for  400  years,  from  July 
1,  1882,  at  annual  rental  of  interest  on  bonds  and  4% 
on  stock.  In  case  of  default  for  60  days  in  any  semi- 
annual payment  of  2%,  the  holders  of  the  certifi- 
cates will  be  entitled  to  the  stock  pledged.  Divi- 
dends, January  &  July,  at  11  Broadway,  New  York, 
and  London.  Listed  on  New  York  Stock  Exchange. 
Transfer  office,  11  Broadway,  New  York. 

INTERNATIONAL  OCEAN  TELEGRAPH 
CO.  6%  GUARANTEED  STOCK.  Capital  stock, 
$3,000,000;  par,  $100.  Leased  until  January,  1981,  to 
the  Western  Union  Telegraph  Co.  Dividends  quar- 


THE  INVESTOR'S   PRIMER  161 

terly,  January,  195  Broadway,  New  York.     Transfer 
office,  195  Broadway,  New  York. 


JACKSON,  LANSING  &  SAGINAW  RR 
GUARANTEED  STOCK.  Line  of  road,  Jackson 
to  Mackinac  City,  Mich.,  with  branches,  379.23 
miles.  Capital  stock,  $2,000,000;  par,  $100.  Leased 
to  Mich.  Cent.  RR  on  September  1,  1871,  in  per- 
petuity. Rental  received  1906,  $70,000  and  $750  ad- 
ditional for  expenses.  Dividends,  March  &  Sep- 
tember 1,  at  Cent.  Station,  New  York.  Transfer 
office,  Grand  Central  Station,  New  York. 

JOLIET  &  CHICAGO  RR  7%  GUARANTEED 
STOCK.  Line  of  road,  Chicago  to  Joliet,  111.,  37.20 
miles  (forming  part  of  the  through  line  of  Chic.  & 
Alton  RR,  Chicago  to  St.  L.).  Capital  stock,  $1,- 
500,000;  par,  $100.  Leased  January  1,  1864,  in  per- 
petuity, to  Chic.  &  Alton  RR,  at  rental  of  7  on 
stock  and  $1,800  for  organization  expenses.  Divi- 
dends, quarterly,  January  (first  Monday)  at  71 
Broadway,  New  York.  Listed  on  New  York  Stock 
Exchange.  Transfer  office,  17  Broadway,  New  York. 

KANSAS  CITY,  ST.  LOUIS  &  CHICAGO  RR 
6%  GUARANTEED  PREFERRED  STOCK. 
Line  of  road,  Mexico  to  Kansas  City,  Mo.,  162  miles. 
Preferred  stock  outstanding,  $1,750,000.  Leased,  in 
perpetuity,  from  November,  1879,  to  Chic.  &  Alton 
RR  at  rental  of  35%  of  gross  earnings,  less  assess- 
ments and  taxes.  When  this  percentage  is  in  ex- 
cess of  interest  on  bonds,  6%  on  preferred  and  7% 
on  common  stock,  after  deducting  taxes,  etc.,  such 
excess  goes  to  Chic.  &  Alton  RR.  Dividends  on 
preferred  stock  are  unconditionally  guaranteed  by  C. 


162  THE  INVESTOR'S   PRIMER 

&  A.  RR  and  are  paid  quarterly  (February  1),  at  71 
Broadway,  New  York.  Transfer  office,  71  Broad- 
way, New  York. 

LITTLE  MIAMI  RR  8%  GUARANTEED 
STOCK.  Line  of  road,  Cincinnati  to  Springfield,  O., 
with  branches,  138  miles.  Capital  stock,  $4,943,- 
100;  par,  $50.  Leased  for  99  years,  from  December 
1,  1869,  to  Pitts.,  Cine.  &  St.  L.  Ry  (now  P.,  C.,  C. 
,&  St.  L.  Ry),  with  permanent  renewal,  at  rental  of 
interest  on  bonds;  rentals  of  leased  lines;  8%  per  an- 
num on  stock,  and  $5,000  for  maintenance  of  or- 
ganization. The  Penna.  RR  is  a  party  to  the  lease, 
and  guarantees  its  faithful  execution.  Dividends, 
quarterly,  March  10,  at  41  East  4th  St,  Cincinnati. 
From  December,  1899,  one-fith  p.  c.  extra  has  been 
paid  semi-annually  (July  &  December)  from  surplus 
invested  fund  making  8  2-5%  per  annum.  Trans- 
fer office,  Cincinnati,  O. 

LITTLE  SCHUYLKILL  NAVIGATION  RR  & 
COAL  CO.  1%  GUARANTEED  STOCK.  Line  of 
road,  Port  Clinton  to  Tamanend,  Pa.,  and  branches, 
31.48  miles.  Capital  stock,  $2,487,850;  par,  $50. 
Leased  to  Phila.  &  Read.  Ry  for  999  years,  from 
December  1,  1896,  at  rental  of  5%  per  annum  on 
stock,  and  $5,000  organization  expenses.  Since 
1897,  dividends  have  been  paid  as  follows:  1897,  6%; 
1898  and  1899,  5^%  each;  1900,  5%;  1901  and  1902, 
S*/2%  each;  1903  and  1904,  5%  each;  1905,  5y2%;  1906, 
5%;  January,  1907,  3%;  payable  January  &  July,  at 
410  Walnut  St.,  Philadelphia.  Listed  on  Philadelphia 
Stock  Exchange.  Transfer  office,  410  Walnut  St., 
Philadelphia,  Pa. 


THE  INVESTOR'S   PRIMER  163 

LOUISIANA  &  MISSOURI  RIVER  RR  7% 
PREFERRED  STOCK.  Line  of  road,  Louisiana 
to  Cedar  City,  Mo.,  101  miles.  Guaranteed  preferred 
stock,  $1,010,000;  par,  $100.  Leased  in  perpetuity, 
August  1,  1870,  to  Chic.  &  Alton  RR,  at  rental  of 
35%  of  gross  earnings,  but  the  lease  was  modified, 
November  13,  1894,  whereby  the  lessee  agreed  to  pay 
the  interest  on  the  bonds  and  the  principal  when 
due;  7%  dividends  on  $329,000  preferred  stock  (the 
balance  being  owned  by  C.  &  A.  RR)  and  to  dis- 
charge the  floating  debt.  Dividends,  February  & 
August  1,  at  71  Broadway,  N.  Y.  Transfer  office,  71 
Broadway,  New  York. 

MASSAWIPPI  VALLEY  RY  6%  GUARAN- 
TEED STOCK.  Line  of  road:  Province  Line  to 
Lennoxville,  Que.,  and  branch,  35.46  miles.  Capital 
stock,  $800,000;  par,  $100.  Leased  for  999  years, 
from  July  1,  1870,  to  Conn.  &  Passumpsic  Rivers 
RR,  which  is  itself  leased  for  99  years  to  the  Bos- 
ton &  Lowell  RR.  The  lessee  pays  interest  on 
bonds  and  dividends  identical  with  those  paid  to 
its  own  stockholders.  Of  the  stock,  $400,000  is 
owned  by  the  Conn.  &  Pass.  Rivers  RR,  and  is  de- 
posited under  its  mortgage  and  $50,000  is  repre- 
sented by  Conn.  Tr.  &  Safe  Dep.  Co.,  of  Hartford 
5%  trust  certificates.  Dividends  were  formerly  5%, 
but  since  January  1,  1897,  6%  has  been  paid.  Divi- 
dends, February  &  August  1,  at  Bost.  Safe  Dep.  & 
Tr.  Co.  Listed  on  Boston  Stock  Exchange.  Trans- 
fer office,  95  Milk  St.,  Boston. 

MORRIS  &  ESSEX  RR  7%  GUARANTEED 
STOCK.  Line  of  road,  Hoboken  to  Phillipsburg, 
N.  J.,  with  branch,  118.9  miles.  Capital  stock,  $15,- 


164  THE  INVESTOR'S  PRIMER 

000,000;  par,  $50.  Leased  in  1868  to  Del.,  Lack.  & 
West.  RR,  in  perpetuity,  the  lessee  assuming  all  lia- 
bilities and  agreeing  to  pay  interest  on  bonds  and 
7%  on  stock.  The  valuable  terminal  facilities  in  N. 
Y.  Harbor  of  the  D.,  L.  &  W.  system  are  owned  by 
this  company.  Dividends,  January  &  July,  at  26 
Exchange  Place,  N.  Y.  Listed  on  N.  Y.  Stock  Ex- 
change. Transfer  office,  26  Exchange  Place,  N.  Y. 

MORRIS  CANAL  &  BANKING  CO  GUARAN- 
TEED 10%  PREFERRED  AND  4%  CONSOLI- 
DATED STOCKS.  Length  of  canal,  Jersey  City 
to  Phillipsburg,  N.  J.,  with  feeders,  106.48  miles. 
Capital  stock,  $1,025,000  consolidated  and  $1,175,000 
preferred;  par,  $100.  Leased  from  April  1,  1871,  to 
Lehigh  Valley  RR,  for  999  years,  lessee  assuming 
the  bonds  and  paying  10%  on  preferred  and  4%  on 
Consolidated  stock.  Dividends  on  both  classes, 
February  &  August  (first  Tuesday),  at  228  South 
Third  St.,  Philadelphia,  Pa.  Transfer  office,  Phila- 
delphia, Pa. 

NASHVILLE  &  DECATUR  RR  7^%  GUAR- 
ANTEED STOCK.  Line  of  road,  Nashville,  Tenn., 
to  Decatur,  Ala.,  119.24  miles.  Capital  stock,  $3,- 
553,750;  par,  $25.  Leased  to  Louisville  &  Nashville 
RR  for  30  years  from  July  1,  1872,  at  rental  of  6% 
on  stock  and  re-leased  for  999  years  from  July  1, 
1900,  at  rental  of  T*/2%  per  annum  on  stock.  The 
$2,100,000  bonds,  which  were  due  July  1,  1900,  were 
retired,  and  stock  issued  therefor.  Stock  of  record 
before  original  lease  was  terminated  is  indorsed 
"original  stock,"  and  guaranteed  regardless  of  net 
earnings  and  superior  to  any  lien.  Dividends,  July 


THE  INVESTOR'S   PRIMER  165 

&   December,  in   Nashville,  Tenn.     Transfer  office, 
Nashville,  Tenn. 

NEW  YORK  &  HARLEM  RR  14%  GUARAN- 
TEED COMMON  AND  PREFERRED  STOCKS. 
Line  of  road,  New  York  to  Chatham,  N.  Y.,  with 
branches,  136.51  miles.  Capital  stock,  $10,000,000, 
of  which  $1,343,950  is  preferred  and  $8,656,050  com- 
mon stock;  par,  $50.  In  addition,  this  company 
owns  the  Fourth  Ave.  St.  RR,  with  9.71  miles  of 
surface  lines  and  branches.  The  steam  portion  of 
the  road  was  leased  to  N.  Y.  C.  &  H.  R.  RR  for  401 
years  from  April  1,  1873,  at  rental  of  interest  on 
bonds  and  8%  on  both  classes  of  stock.  Under  a 
supplementary  agreement  dated  October  1,  1898,  the 
rentaL is  now  interest  on  $12,000,000  3^%  first  mort- 
gage bonds,  and  10%  on  both  classes  of  stock.  The 
street  railway  section  was  leased  in  July,  1896,  for 
999  years  to  Metropolitan  St.  Ry,  at  $350,000  per 
annum  (equal  to  3^%  on  total  stock)  until  July, 
1901,  and  $400,000  per  annum  (equal  to  4%  on  total 
stock)  thereafter.  This  property  is  now  operated 
by  New  York  City  Ry.  Dividends,  14%  per  annum 
on  both  classes  of  stock,  viz.,  10%  under  lease  of 
steam  railroad  property,  January  &  July,  and  4% 
under  lease  of  street  railway  line,  August  &  October, 
at  Grand  Central  Station,  N.  Y.  Listed  on  New 
York  stock  Exchange.  Transfer  office,  Grand  Cen- 
tral Station,  New  York. 

NEW  YORK,  LACKAWANNA  &  WESTERN 
RY  5%  GUARANTEED  STOCK.  Line  of  road, 
Binghamton  to  International  Bridge,  N.  Y.,  with 
branches,  208.06  miles.  Capital  stock,  $10,000,000; 
par,  $100.  Leased  October  2,  1882,  to  Del.,  Lack.  & 


166  THE  INVESTOR'S  PRIMER 

West.  RR,  in  perpetuity,  at  rental  of  5%  on  stock; 
lessee  guaranteeing  principal  and  interest  of  bonds. 
Dividends,  quarterly,  January,  at  26  Exchange  Place, 
N.  Y.  Listed  on  New  York  Stock  Exchange.|  Trans- 
fer office,  26  Exchange  Place,  N.  Y. 

NORTH  CAROLINA  RR  7%  GUARANTEED 
STOCK.  Line  of  road,  Goldsboro  to  Charlotte,  N. 
C.,  and  branch,  224.34  miles.  Capital  stock,  $4,000,- 
000;  par,  $100.  State  of  N.  C.  owns  $3,000,000  stock. 
Leased  for  99  years,  from  January  1,  1896,  to  South- 
ern Ry,  at  rental  of  $266,000  per  annum  (equaling 
6%%  on  stock  and  taxes),  until  December  31,  1901, 
and  $286,000  (equaling  7%  on  stock  and  taxes)  there- 
after. Dividends,  February  &  August  10,  at  Burling- 
ton, N.  C.  Transfer  agent,  Sec.  of  company,  Bur- 
lington, N.  C. 

NORTHERN  (N.  H.)  RR  6%  GUARANTEED 
STOCK.  Line  of  road,  Concord,  N.  H.,  to  White 
River  Junction,  Vt,  and  branch,  82.91  miles.  Capi- 
tal stock,  $3,068,400;  par,  $100.  Leased  to  Bos.  & 
Lowell  RR  for  99  years  from  January  1,  1890,  lease 
being  later  assigned  to  Boston  &  Me.  RR.  Rental, 
interest  on  bonds  of  subsidiary  cos.,  $5,000  per  an- 
num for  organization  expenses,  and  6%  per  annum 
on  stock.  Dividends,  quarterly,  January  1,  at  1023 
Old  South  Building,  Boston.  Until  July,  1897,  1% 
extra  was  regularly  paid  from  contingent  fund;  in 
1894,  5%;  in  1896,  2%;  in  1897,  5%,  and  in  July,  1904, 
1/2%.  Listed  on  Boston  Stock  Exchange. 

NORTHERN  RR  OF  N.  J.  4%  GUARANTEED 
STOCK.  Line  of  road,  Bergen  Junction,  N.  J.,  to 
Sparkill,  N.  Y.,  21.54  miles.  Capital  stock,  $1,000,: 


THE  INVESTOR'S   PRIMER  167 

000;  par,  $100.  Leased  from  June  1,  1899,  to  Erie 
RR,  for  the  period  of  its  charter  and  any  renewals 
thereof.  Rental,  interest  on  bonds,  taxes  and  ex- 
penses, and  4%  on  stock.  Dividends,  quarterly, 
March,  at  11  Broadway,  N.  Y.  Transfer  office,  11 
Broadway,  New  York. 

NORTH  PENNA.  RR  8%  GUARANTEED 
STOCK.  Line  of  road,  Phila.  to  Bethlehem,  Pa., 
and  branches,  86.21  miles.  Capital  stock:  Author- 
ized, $6,000,000;  outstanding,  $5,382,150;  par,  $50. 
Leased  to  Phila.  &  Read.  RR  for  990  years,  from 
May  1,  1879,  and  lease  assumed  by  Phila.  &  Read. 
Ry  in  1896.  Rental,  S%  per  annum  on  capital  stock, 
interest  on  bonds,  and  $12,000  organization  ex- 
penses. Dividends,  quarterly,  February  25,  at  240 
South  Third  St.,  Phila.  Listed  on  Phila.  Stock  Ex- 
change. Transfer  office,  Philadelphia,  Pa. 

NORTHWESTERN  TELEGRAPH  CO  6% 
GUARANTEED  STOCK.  Capital  stock,  $2,500,000; 
par,  $50.  Leased  until  May  7,  1980,  to  West.  Union 
Tel.  Co.  Dividends,  January  &  July,  in  N.  Y.  Listed 
on  New  York  Stock  Exchange.  Transfer  office,  195 
Broadway,  N.  Y. 

NORWICH  &  WORCESTER  RR  8%  GUAR- 
ANTEED PREFERRED  STOCK.  Line  of  road, 
Groton,  Conn.,  to  Worcester,  Mass.,  with  branch, 
71.60  miles.  Preferred  stock,  $3,000,000;  par,  $100. 
Leased  from  February  1,  1869,  for  99  years,  to  New 
England  RR;  lease  assumed  by  N.  Y.,  N.  Haven  & 
Hartford  RR  July  1,  1898.  Rental,  8%  per  annum 
on  stock  and  interest  on  bonds.  Dividends,  quar- 
terly, January  1,  at  Mechanics'  Nat.  Bank,  Wor- 


168  THE  INVESTOR'S  PRIMER 

cester,   Mass.     Listed  on  Boston   Stock   Exchange. 
Transfer  office,  Second  Nat.  Bank,  Boston,  Mass. 

OLD  COLONY  RR  7%  GUARANTEED 
STOCK.  Line  of  road,  Boston,  Mass.,  to  Newport, 
R.  I.,  with  branches,  518.3  miles.  Capital  stock, 
authorized,  $20,000,000;  outstanding,  $18,371,400; 
par,  $100.  Leased  to  N.  Y.,  N.  Haven  &  Hartford 
RR  for  99  years,  from  March  1,  1893,  at  rental  of 
7%  per  annum  on  stock,  lessee  assuming  all  liabili- 
ties. Dividends,  quarterly,  January,  at  company's 
office,  South  Term.  Station,  Boston.  As  of  July  1, 
1906,  the  New  Haven  owned  $2,244,900  of  this  stock. 
Listed  on  Boston  Stock  Exchange.  Transfer  agent, 
G.  B.  Phippen,  Treas.,  Boston. 

OSWEGO  &  SYRACUSE  RR  9%  GUARAN- 
TEED STOCK.  Line  of  road,  Oswego  to  Syracuse, 
N.  Y.,  34.98  miles.  Capital  stock,  $1,320,400;  par, 
$50.  Leased  February  13,  1869,  for  term  of  corpo- 
rate existence,  with  renewal  thereof,  to  Del.,  Lack. 
&  West.  RR,  at  rental  of  interest  on  bonds,  and 
9%  per  annum  on  stock.  Dividends,  February  & 
August  20,  at  26  Exchange  Place,  N.  Y.  Transfer 
office,  26  Exchange  Place,  New  York. 

PACIFIC  &  ATLANTIC  TELEGRAPH  CO.  OF 
THE  U.  S.  4%  GUARANTEED  STOCK.  Capital 
stock,  $2,000,000,  of  which  West.  Union  Tel.  Co. 
owns  $1,458,150;  par,  $25.  Leased  to  West.  Union 
Tel.  Co.  for  999  years,  from  January  1,  1874.  Divi- 
dends, January  &  July  1,  at  195  Broadway,  N.  Y. 
Transfer  office,  195  Broadway,  New  York. 

PETERBOROUGH  RR  4%  GUARANTEED 
STOCK.  Line  of  road,  Wilton  to  Greenfield,  N.  H., 


THE  INVESTOR'S   PRIMER  169 

10.50  miles.  Capital  stock,  $385,000;  par,  $100. 
Leased  on  April  1,  1893,  to  Bost.  &  Lowell  RR,  for 
93  years,  at  rental  equal  to  4%  on  stock,  taxes  and 
$300  for  organization  expenses;  operated  by  Bost. 
&  Me.  RR  through  its  lease  of  Bost.  &  Lowell. 
Dividends,  August  &  October  1,  at  Treasurer's 
office,  Nashua,  N.  H.  Transfer  office,  Nashua,  N.  H. 

PHILA.  &  TRENTON  RR  10%  GUARAN- 
TEED STOCK.  Line  of  road,  N.  J.  &  Pa.  State 
line  in  Del.  River  at  Trenton,  to  Frankfort  Junction, 
Phila.,  with  branch,  26.30  miles.  Capital  stock,  $1,- 
259,100;  par,  $100.  Leased,  conjointly  with  United 
RRs  of  N.  J.,  for  999  years  from  June  30,  1871,  to 
Penna.  RR,  at  rental  of  10%  per  annum  on  $494,100 
stock,  the  remaining  $765,000  being  owned  by  the 
United  RRs  of  N.  J.  Dividends,  quarterly,  January 
10,  at  Broad  St.  Station,  Phila.  Listed  on  Philadel- 
phia Stock  Exchange. 

PHILA.,  GERMANTOWN  &  NORRISTOWN 
RR  12%  GUARANTEED  STOCK.  Line  of  road, 
Philadelphia  to  Norristown,  Pa.,  with  branches, 
20.96  miles.  Capital  stock,  $2,246,900;  par,  $50. 
Leased  for  999  years,  from  December  1,  1870,  to 
Phila.  &  Read.  RR,  the  lease  being  assumed  by 
Phila.  &  Read.  Ry  in  the  reorganization  in  1896. 
Rental,  $277,623  per  annum,  representing  12%  on 
stock  and  $8,000  organization  expenses.  Dividends, 
quarterly,  March  4,  at  Mar.  &  Mer.  Bldg.,  Phila. 
Listed  on  Philadelphia  Stock  Exchange.  Transfer 
office,  Mariner  &  Merchant  Bldg.,  Philadelphia,  Pa. 

PITTSBURG,  BESSEMER  &  LAKE  ERIE  RR 
GUARANTEED  3%  COMMON  AND  6%  CUMU- 


170  THE  INVESTOR'S   PRIMER 

LATIVE  PREFERRED  STOCK.  Line  of  road, 
North  Bessemer,  Pa.,  to  Conneaut  Harbor,  Ohio, 
with  branches,  204.05  miles.  Capital  stock,  $10,000,- 
000  common  and  $2,000,000  preferred.  Leased  to 
Bessemer  &  Lake  Erie  RR  for  999  years  from  April 
1,  1901,  at  annual  rental  of  interest  on  bonds,  or- 
ganization expenses,  and  dividends  of  6%  on  pre- 
ferred and  3%  on  common  stock.  Dividends  on  com- 
mon stock,  August  &  October;  on  preferred,  July  & 
December  1,  by  check.  Transfer  agents,  U.  S.  Trust 
Co.,  N.  Y.,  for  common,  and  Union  Tr.  Co.,  Pitts- 
burg,  for  preferred  stock. 

PITTSBURG,  FORT  WAYNE  &  CHICAGO 
RY  7%  GUARANTEED  STOCK.  Line  of  road, 
Pittsburg,  Pa.,  to  Chic.,  with  branches  and  leased 
lines,  497.10  miles.  Capital  stock,  $37,374,500  special 
improvement  and  $19,714,286  general  stock;  par,  $100. 
The  former  is  subject  to  the  general  stock,  and  is 
issued  to  the  Penna.  RR  for  improvements.  Leased, 
in  perpetuity,  from  July  1,  1869,  to  the  Penna.  RR 
at  rental  of  interest  and  sinking  fund  of  debt,  and 
7%  per  annum  on  both  classes  of  stock.  Lease  as- 
signed to  Penna.  Co.,  lessee  assuming  all  obliga- 
tions of  the  lessor.  Dividends  on  general  stock, 
quarterly,  on  Tuesday  after  the  first  Monday  in 
January,  April,  July  and  October,  and  on  special 
stock  quarterly,  January  1 ;  payments  on  both  classes 
at  Winslow,  Lanier  &  Co.,  N.  Y.  In  July,  1901,  2% 
extra  was  declared.  Listed  on  New  York  Stock  Ex- 
change. Transfer  office,  Winslow,  Lanier  &  Co., 
New  York. 

PITTSBURG,  McKEESPORT  &  YOUGHIO- 
GHENY  RR  6%  GUARANTEED  STOCK.  Line  of 


THE  INVESTOR'S  PRIMER  171 

road,  Pittsburg  to  New  Haven,  Pa.,  and  branches, 
109.6  miles.  Capital  stock,  authorized,  $4,000,000; 
outstanding,  $3,959,650;  par,  $50.  Leased  for  999 
years  to  Pittsburg  &  Lake  Erie  RR  from  August  3, 
1881,  at  rental  of  6%  per  annum  on  stock,  and 
guarantee  of  principal  and  interest,  on  bonds  jointly 
by  Pittsburg  &  Lake  Erie  and  Lake  Shore  &  Michi- 
gan Southern  Cos.,  the  guarantee  being  endorsed  on 
both  bonds  and  stock  certificates.  The  stock  guar- 
antee contains  the  proviso  that  the  holder  shall  ac- 
cept par  for  stock  on  July  1,  1934.  Dividends,  Janu- 
ary &  July  1,  at  Union  Tr.  Co.,  N.  Y.  Listed  on 
New  York  Stock  Exchange.  Transfer  office,  Central 
Trust  Co.,  New  York. 

PORTLAND  &  OGDENSBURG  RY  2%  GUAR- 
ANTEED STOCK.  Line  of  road,  Portland,  Me.,  to 
Lunenburg,  Vt.,  109.1  miles.  Capital  stock,  $4,392,- 
538;  par,  $100.  Leased  to  Me.  Cent.  RR  for  999 
years,  from  August  20,  1888,  rental  being  interest  on 
bonds  and  2%  on  stock.  Dividends,  quarterly,  Feb- 
ruary (last  day),  at  Treas.'  office,  Me.  Cent.  RR, 
Portland,  Me.  Transfer  office,  Treasurer's  office, 
Portland,  Me. 

PROVIDENCE  &  WORCESTER  RR  10% 
GUARANTEED  STOCK.  Line  of  road,  Providence, 
R.  I.,  to  Worcester,  Mass.,  and  branch,  47.9  miles. 
Capital  stock,  $3,500,000;  par,  $100.  Leased  to  N.  Y., 
N.  Haven  &  H.  RR  Co.  for  99  years,  from  July  1, 
1892,  at  rental  of  10%  per  annum  on  stock,  interest  on 
bonds  and  $6,000  for  organization  expenses.  Divi- 
dends, quarterly,  March  31,  at  Providence,  R.  I. 
Listed  on  Boston  Stock  Exchange.  Transfer  office, 
Providence,  R.  I. 


172  THE  INVESTOR'S   PRIMER 

RENSSELAER  &  SARATOGA  RR  8%  GUAR- 
ANTEED STOCK.  Line  of  road  owned,  Saratoga 
Spa  to  Lake  Station,  Whitehall,  N.  Y.,  40.39  miles; 
Troy  to  Ballston  Spa,  25.48  miles;  Eagle  Bridge,  N. 
Y.,  to  Rutland,  Vt.,  62.44  miles;  branches,  22.83  miles 
—total,  151.14  miles.  Capital  stock,  $10,000,000;  par, 
$100.  Leased  in  perpetuity  from  March  1,  1871,  to 
Del.  &  Hudson  Co.,  at  rental  of  interest  on  bonds, 
lease  obligations  and  8%  per  annum  on  stock.  Divi- 
dends, January  &  July  1,  at  National  Bank  of  Com- 
merce, New  York.  Listed  on  New  York  Stock  Ex- 
change. Transfer  office,  National  Bank  of  Com- 
merce, New  York. 

ROME,  WATERTOWN  &  OGDENSBURG  RR 
5%  GUARANTEED  STOCK.  Line  of  road,  Mas- 
sena  Springs  to  Richland,  N.  Y.,  with  branches, 
410.14  miles.  Capital  stock,  $10,000,000;  par,  $100. 
Leased  to  N.  Y.  Cent.  &  Hud.  River  RR  on  March 
14,  1891,  for  corporate  existence,  at  rental  of  $15,000 
per  annum  until  April  1,  1901,  thereafter  $7,000  per 
annum,  interest  on  bonds  and  5%  per  annum  on 
stock.  Dividends  quarterly  (February  15)  at  Grand 
Central  Station,  New  York.  Listed  on  New  York 
Stock  Exchange.  Transfer  office,  Central  Trust  Co., 
New  York. 

SECOND  AVENUE  RR  9%  GUARANTEED 
STOCK.  Capital  stock,  $1,862,000;  par,  $100.  Leased 
to  Metropolitan  St.  Ry  from  January  28,  1898,  for 
the  term  of  its  corporate  existence  at  annual  rental 
of  8%  on  the  stock,  for  three  years  from  March  1, 
1898,  and  9%  thereafter.  Under  lease  of  the  Metro- 
politan Street  Ry  Co.  to  the  Interurban  Street  Ry 
Co.,  this  road  is  now  operated  by  the  New  York  City 


THE  INVESTOR'S  PRIMER  173 

Ry.  Dividends  quarterly,  March  1,  at  621  Broad- 
way, New  York.  Transfer  agent,  Sec.  of  company, 
New  York. 

(JNITED  NEW  JERSEY  RR  &  CANAL  CO. 
10%  GUARANTEED  STOCK.  Line  of  road,  Cam- 
den  to  South  Amboy,  N.  J.,  Trenton  to  Jersey  City, 
N.  J.,  with  branches,  471.93  miles.  Canal  from  Bor- 
dentown  to  New  Brunswick,  N.  J.,  and  feeder,  66 
miles.  Capital  stock,  $21,240,000;  par,  $100.  Leased 
to  Penna.  RR  Co.  June  30,  1871,  for  999  years  at 
rental  of  10%  on  stock,  interest  on  bonds,  taxes,  etc. 
Dividends  (quarterly)  January  10,  at  Nat.  Bank  of 
Commerce,  New  York,  and  Broad  Street  Station, 
Philadelphia.  Transfer  office,  Trenton,  N.  J.  Listed 
on  Philadelphia  Stock  Exchange. 

UTICA  &  BLACK  RIVER  CO.  7%  GUARAN- 
TEED STOCK.  Line  of  road,  Utica  to  Ogdensburg, 
N.  Y.,  with  branches,  150.13  miles.  Capital  stock 
authorized  $3,000,000;  outstanding,  $2,223,000,  of 
which  $1,120,000  (a  majority)  is  held  in  the  treasury 
of  the  Rome,  Watertown  &  Ogdensburg  RR  Co. 
Par,  $100.  Leased  in  perpetuity,  April  14,  1886,  to 
Rome,  Watertown  &  Ogdensburg  RR;  lease  trans- 
ferred to  the  New  York  Central  &  Hudson  River 
RR,  March  14,  1891.  Rental,  interest  on  bonds,  7% 
per  annum  on  stock  and  $4,500  for  organization  ex- 
penses. Dividends,  March  and  September  30,  at 
Grand  Central  Station,  New  York.  Transfer  office, 
Central  Trust  Co.,  New  York.  Listed  on  the  N.  Y. 
Stock  Exchange. 

UTICA,  CHENANGO  &  SUSQUEHANNA 
VALLEY  RY  6%  GUARANTEED  STOCK.  Line 


174  THE  INVESTOR'S   PRIMER 

of  road,  Utica  to  Greene,  N.  Y.,  with  branches,  97.41 
miles.  Capital  stock,  $4,000,000;  par,  $100.  Leased 
April  9,  1870,  in  perpetuity,  to  Del.,  Lack.  &  West. 
RR  Co.  at  rental  of  6%  per  annum  on  capital  stock. 
Dividends,  March  &  November  1,  at  26  Exchange 
Place,  New  York.  Transfer  office,  26  Exchange 
Place,  New  York. 

VERMONT  &  MASS.  RR  6%  GUARANTEED 
STOCK.  Line  of  road,  Fitchburg  to  Greenfield, 
Mass.,  and  branch,  58.58  miles.  Capital  stock,  $3,- 
193,000;  par,  $100.  Leased  for  999  years  from  Janu- 
ary 1,  1874,  to  Fitchburg  RR  (Bost.  &  Me.  RR). 
Rental,  interest  on  bonds,  $3,000  organization  ex- 
penses and  6%  per  annum  on  stock.  Dividends, 
August  &  October  1,  at  53  Devonshire  Street,  Boston. 
Listed  on  Boston  Stock  Exchange.  Transfer  office, 
Boston,  Mass. 

WARREN  RR  7%  GUARANTEED  STOCK. 
Line  of  road,  New  Hampton  Junction,  N.  J.,  to  Del. 
River,  18.82  miles.  Capital  stock,  $1,800,000;  par,  $50. 
Leased,  October  1,  1857,  in  perpetuity,  to  Del.,  Lack. 
&  West.  RR  at  rental  of  interest  on  bonds  and  7% 
on  stock.  Dividends  August  &  October  15,  at  26 
Exchange  Place,  New  York.  Transfer  office,  26  Ex- 
change Place,  New  York. 

WORCESTER,  NASHUA  &  ROCHESTER  RR 
GUARANTEED  STOCK.  Line  of  road,  Wor- 
cester, Mass.,  to  Rochester,  N.  H.,  94.48  miles. 
Capital  stock,  $3,099,800;  par,  $100.  Leased  to  Bos- 
ton &  Maine  RR  for  50  years,  from  January  1,  1886, 
at  annual  rental  of  $250,000  and  taxes.  Dividends 
have  been  paid  as  follows:  1887  to  1893,  6%  per  an- 


THE  INVESTOR'S  PRIMER  175 

num;  1894  to  1897,  5%  per  annum;  1898,  554%;  1899, 
4^%;  1900,  4%;  1901,  534%;  1902,  5%;  1903,  4^%; 
1904,  Sy2%;  1905,  53,4%;  1906,  534%;  1907,  January, 
234%.  Dividends,  January  &  July  1,  at  American 
Trust  Co.,  Boston,  Mass.  Listed  on  Boston  Stock 
Exchange.  Transfer  office,  American  Trust  Co., 
Boston. 


ALPHABETICAL  INDEX 


Page 

Account  and  Risk 15 

Accrued  Dividends 15 

Accrued  Interest 16 

Accumulated  Dividends 17 

Adjustment  Bonds 18 

Albany  &  Susquehanna  RR  9%  Guaranteed 

Stocks  147 

Allegheny  &  Western  Ry  6%  Guaranteed  Stocks  147 

Allotment  20 

American  Smelters  Secur.  Co.  5%  Guaranteed 

Stock  147 

American  Telegraph  &  Cable  Co.  5%  Guaranteed 

Stock  148 

Atchison,  Topeka  &  Sante  Fe  Ry  Preferred  Stock  135 

Arbitrage  20 

Assented  Stocks  or  Bonds 25 

Assessment  25 

Assigned  in  Blank 27 

Atlanta  &  Charlotte  Air  Line  Guaranteed  Stock.  148 

Averaging  27 

Balance  of  Trade 28 

Bald  Eagle  Valley  RR  Guaranteed  Stock  149 

Baltimore  &  Ohio  RR  Preferred  Stock 135 

Banking  29 

Bank  of  England 33 

Bank  of  England  Note 33 

Bank  of  England  Rate 35 

Bank  Statement 35 

Bear 38 

Beech  Creek  RR  Guaranteed  Stock 149 

Bill  of  Exchange 39 

Blind  Pool 40 

Bonds  40 

Books  Closed 42 

Books  Opened c 43 

(177) 


178  INDEX. 

Page 

Book  Value 43 

Borrowing  and  Lending  Stocks . . . . . . .' .'  44 

Boston  &  Albany  RR  Guaranteed  Stock.. .  149 

Boston  &  Lowell  RR  Guaranteed  Stock 150 

Boston  &  New  York  Air  Line  Guaranteed  Stock  150 

Boston  &  Providence  RR  Guaranteed  Stock 151 

Broadway  &  Seventh  Ave.  RR  Guar.  Stock 151 

Brooklyn  City  RR  Guaranteed  Stock 151 

Bucketing  45 

Bucket  Shop ................  47 

Buffalo,  Rochester  &  Pittsburgh  Ry  Pref.  Stock  136 

Bull 49 

Buyers*  Option 49 

Call  |  ]  |  ]  49 

Call  Loans 50 

Called  Bonds 50 

Canadian  Pacific  Ry  Preferred  Stock .....  136 

Car  Miles 51 

Catawissa  RR  Guaranteed  Stock 152 

Chicago  &  Alton  RR  Preferred  Stock 136 

Chicago  &  Eastern  Illinois  RR  Guaranteed  Stock  152 
Chicago  &  Northwestern  Ry  Preferred  Stock..  137 
Chicago,  St.  Paul,  Minneapolis  &  Omaha  Pfd. 

Stock  137 

Chicago,  Milwaukee  &  St.  Paul  Preferred  Stock  138 
Chicago,  Terminal  Transfer  RR  Preferred  Stock  138 
Clearfield  &  Mahoning  Ry  Guaranteed  Stock...  153 
Cleveland  &  Mahoning  Valley  Ry  Guaranteed 

Stock 153 

Cleveland  &  Pittsburg  RR  Guaranteed  Stock...  154 

Close  Corporation 51 

Colorado  &  Southern  Ry  Preferred  Stock 138 

Columbus  &  Xenia  RR  Guaranteed  Stock 154 

Commercial  Paper 52 

Common  Stock 52 

Concord  &  Montreal  RR  Guaranteed  Stock 155 

Connecticut  &  Passumpsic  Rivers  RR  Guar. 

Stock  155 

Connecticut  River  RR  Guaranteed  Stock 155 

Consol  53 

Contango 54 

Corner  54 


INDEX.  179 

Page 

Coupon    Bonds 55 

Cumulative    Dividends 56 

Current    Assets 57 

Current  Liabilities 57 

Cutting  a   Melon 57 

Dayton  &  Michigan  RR  Guaranteed  Stock 156 

Debenture 58 

Default   58 

Delaware  &  Bound  Brook  RR  Guaranteed  Stock  156 

Denver  &  Rio  Grande  RR  Preferred  Stock 139 

Detroit,    Hillsdale    &    Southwestern    RR    Guar. 

Stock 156 

Discretionary   Accounts 59 

Dividend    59 

Elmira  &  Williamsport  RR  Guaranteed  Stock..  157 

Equity 60 

Erie  RR  Preferred  Stock 139 

Erie  &  Pittsburgh  RR  Guaranteed  Stock 157 

European  &  North  American  Rys.  Guar.  Stock. .  158 

Exchange    61 

Ex-Dividend   61 

Ex-Interest    62 

Ex-Rights    62 

Fall  Brook  Ry  Guaranteed  Stocks 158 

Fitchburg  RR  Guaranteed  Stocks 158 

Fixed  Charge 63 

Flat    63 

Floating   Debt 64 

Foreign   Exchange 64 

Fort  Wayne  &  Jackson  RR  Guaranteed  Stock..  159 

Founders'   Shares 67 

Franchise 67 

Funded   Debt 68 

Georgia  RR  &  Banking  Co.  Guaranteed  Stock..  159 

Gold    Bonds 69 

Gold  &  Stock  Telegraph  Co.  Guaranteed  Stock. .  160 

Granger  Railroad 69 

Great  Northern  Ry  Preferred  Stock 140 

G.  T.  C 70 

Guaranteed   Bonds 70 

Guaranteed  Stock 71 

Hocking  Valley  Ry  Preferred  Stock 140 


180  INDEX. 

Page 

Holding   Company 71 

Hypothecation   72 

Illinois  &  Mississippi  Telegraph  Guar.  Stock..   160 
Illinois  Central  Leased  Line  Guaranteed  Stock..   160 

Income  Account 72 

Income  Basis 73 

Income  Bonds 73 

International  Ocean  Telegraph  Co.  Guar.  Stock  160 

Irredeemable    Bonds 73 

Jackson,  Lansing  &  Saginaw  RR  Guar.  Stock..   161 

Joint    Bonds 74 

Joliet  &  Chicago  RR  Guaranteed  Stock 161 

Kaffirs  74 

Kangaroos  74 

Kansas  City,  St.  Louis  &  Chicago,  Guar.  Stocks  161 

Listed    Stock 75 

Little  Miami  RR  Guaranteed  Stock 162 

Little  Schuylkill  Navigation  &   Coal  Co.  Guar. 

Stock  162 

Lombard    Street 76 

London   Quotations 76 

Long  Accounts 77 

Louisiana  &  Missouri  River  Ry  Preferred  Stock.   163 

Manipulation    77 

Margin 79 

Massawippi  Valley  Ry  Guaranteed  Stock 163 

Matched   Order 81 

Mileage    81 

Minneapolis  &  St.  Paul  Preferred  Stock 140 

Missouri,  Kansas  &  Texas  Ry  Preferred  Stock. .   141 

Mixed   Loan 82 

Monetary 83 

Monetary    Standing 83 

Money    Broker 85 

Money    Market 85 

Money   Rates 86 

Monometalism   86 

Morris  &  Essex  RR  Guaranteed  Stock 163 

Morris  Canal  &  Banking  Co.  Guaranteed  Stock.  164 

Mortgagee  87 

Movable    Exchange 87 

Municipal    Bonds 87 


INDEX.  181 

Page 

Nashville  &  Decatur  RR  Guaranteed  Stock 164 

National   Debt 87 

Net 88 

New  York  &  Harlem  RR  Guaranteed  Stocks . .   165 

New  York  Clearing  House  Association 88 

New  York,  Lackawanna  &  Western  Ry   Guar. 

Stock 165 

New  York  Stock  Exchange 89 

New  York  Stock  Exchange  Clearing  House 90 

Non-Assented  Stocks  or  Bonds 96 

Non-Cumulative   Stock 96 

Non-Interest  Bearing 96 

Norfolk  &  Western  Ry  Preferred  Stock 141 

North  Carolina  RR  Guaranteed  Stock 166 

Northern  RR  Guaranteed  Stock 166 

Northern  RR  of  N.  J.  Guaranteed  Stock 166 

North  Pennsylvania  RR  Guaranteed  Stock 167 

Northwestern  Telegraph  Co.  Guaranteed  Stock.   167 
Norwich  &  Worcester  RR  Guaranteed  Stock...   167 

Note    Broker 97 

Old  Colony  RR  Guaranteed  Stock. 168 

On  a  Scale 97 

On   Margin 97 

Option 97 

Optional    Bonds 99 

Ordinary  Stock 99 

Oswego  &  Syracuse  RR  Guaranteed  Stock 168 

Outside  Broker 100 

Pacific  &  Atlantic  Telegraph  Co.  Guar.  Stock..  168 

Par 100 

Par  of  Exchange 101 

Participating    Bonds 102 

Passenger  Density 103 

Passenger   Miles 103 

Passing  a  Dividend 103 

Peterborough  RR  Guaranteed  Stock 168 

Philadelphia  &  Trenton  RR  Guaranteed  Stock..   169 
Philadelphia,    Germantown    &    Norristown    RR 

Guar.    Stock 169 

Pittsburgh,   Bessemer  &   Lake   Erie   RR   Guar. 

Stock  169 


182  INDEX. 

Page 
Pittsburgh,  Cincinnati,  Chicago  &  St.  Louis  RR 

Pfd.  Stock 141 

Pittsburgh,   Fort  Wayne   &   Chicago   Ry   Guar. 

Stock  170 

Pittsburgh,    McKeesport   &    Youghiogheny   RR 

Guar.    Stock 170 

Plain  Bond 103 

Pool    ., 104 

Portland  &  Ogdensburg  RR  Guaranteed  Stock..   171 

Preference    Stock 104 

Preferred    Ordinary    Stock 105 

Preferred    Stock 105 

Premium    106 

Principal    107 

Privilege 107 

Providence  &  Worcester  RR  Guaranteed  Stock.  171 

Proxy    109 

Put > 109 

Pyramiding   110 

Railroad   Earnings Ill 

Reading  Company  Preferred  Stocks 142 

Readjustment   113 

Registered    Bonds 114 

Registered  Coupon  Bond 115 

Rehypothecation 115 

Released  Endorsed  Bond 115 

Renssalaer  &  Saratoga  RR  Guaranteed  Stock..   172 

Reorganization    116 

Repudiation    117 

Rock  Island  Company  Preferred  Stock 142 

Rome,  Watertown  &   Ogdensburg  RR  Guaran- 
teed   Stock 172 

Rupee    Paper 118 

Scrip    118 

Scrip    Dividends 119 

Seaboard   Company  Preferred   Stocks 143 

Second  Avenue  RR  Guaranteed  Stock 172 

Second  Mortgage 119 

Securities  Company 119 

Sellers  Option 119 

Selling   Short 120 

Settlement  (The) 12Q 


INDEX.  183 

Page 

Short  121 

Sinking  Fund 122 

Sinking   Fund    Bonds 122 

Southern  Pacific  Company  Preferred  Stock 143 

Southern  Ry  Preferred  Stock 144 

Special  Aid  Bond 123 

Special  Assessment  Bond 123 

Spread 123 

Stock    Power 124 

Stop  Order 124 

Straddle    124 

Syndicate    125 

Time   Loan 126 

Ton  Mile  Cost 126 

Ton    Miles 126 

Train    Miles 127 

Transfer  127 

Trustee    Stock 127 

Two  Dollar  Broker 128 

Unassented  Stock  or  Bonds 128 

Underlying    Mortgage 128 

Underwriter    128 

Unified   Bonds 128 

Unlisted    Stocks 129 

Union  Pacific  RR  Preferred  Stock 144 

United  New  Jersey  RR  &  Canal  Co.  Guar.  Stock  173 

Utica  &  Black  River  RR  Guaranteed  Stock 173 

Utica,    Chenango    &    Susquehanna    Valley    Ry 

Guar.    Stock 173 

Value  Bill 129 

Vermont  &  Massachusetts  RR  Guaranteed  Stock  174 

Voting  Trust 129 

Voting  Trust  Certificates 130 

Wabash  RR  Preferred  Stock 145 

Warren  RR  Guaranteed  Stock 174 

Washing    130 

Watered    Stock 130 

When   Issued 131 

Wisconsin  Central  RR  Preferred  Stock 145 

Worcester,  Nashua  &  Rochester  RR  Guar.  Stock  174 

X-D   131 

X-I    


RETURN  TO  the  circulation  desk  of  any 
University  of  California  Library 

or  to  the 

NORTHERN  REGIONAL  LIBRARY  FACILITY 
Bldg.  400,  Richmond  Field  Station 
University  of  California 
Richmond,  CA  94804-4698 

ALL  BOOKS  MAY  BE  RECALLED  AFTER  7  DAYS 

•  2-month  loans  may  be  renewed  by  calling 
(510)642-6753 

•  1-year  loans  may  be  recharged  by  bringing 
books  to  NRLF 

•  Renewals  and  recharges  may  be  made  4 
days  prior  to  due  date. 

DUE  AS  STAMPED  BELOW 


JUL6    1<Wft 


MAY  1  4  2008 


12,000(11/95) 


YB  18224 


/73Q39 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


. 


